Australia faces East Timor challenge to oil rights

Australia faces East Timor challenge to oil rights

SYDNEY (AFP): Australia may have to concede most of the potentially massive oil and gas reserves in the Timor Sea to an independent East Timor, legal and oil industry officials said Thursday.

The reserves lie in an area covered by a complex treaty Australia signed with Indonesia in 1989, which divides exploitation rights to the seabed between Australia and East Timor.

But officials said Thursday an independent East Timor would have a powerful case to renegotiate the contentious Timor Gap treaty, and win a larger share of oil and gas revenues estimated at between 500 million and five billion barrels.

A spokesman for Foreign Minister Alexander Downer said the government was happy with existing arrangements, but the future of the treaty was under "active consideration".

"The arrangement is a matter for both parties to agree on in due course," he told AFP. "Both parties are aware of the commercial importance to maintain stability in the region."

Oil industry consultant and Timor Gap analyst Geoffrey McKee said the poverty-stricken East Timor could make an unanswerable case.

"All our research points to the fact that a settlement in accordance with international norms would be in East Timor's favor," he said.

"If it goes to arbitration East Timor can't lose."

This region of the Timor Sea became known as the Timor Gap after a 1972 seabed border agreement between Australia and Indonesia was challenged by Portuguese Timor.

Australia sought to have the border follow its continental shelf, while the Portuguese insisted it be midway between their coastlines, which would have seen the bulk of the oil and gas reserves fall under Portuguese control.

"The view that it would be strategically and economically advantageous to Australia if Indonesia took East Timor was a factor in Canberra's passivity about the (1975) invasion," Andrew McNaughtin, convener of the Australia East Timor Association, said.

He said it would be up to a future independent East Timor to decide how to handle the treaty, which Indonesia formally withdrew from in January.