Australia ratifies controversial East Timor gas treaty

Australia ratifies controversial East Timor gas treaty

Agence France-Presse, Sydney

Australia's parliament ratified a key treaty with East Timor Thursday on the joint development of multibillion dollar oil and natural gas reserves under the Timor Sea.

But the final Senate vote came only after Australia squeezed concessions from its tiny and impoverished neighbor over a much more lucrative gas project in a disputed part of the sea.

The Timor Sea Treaty, ratified by the Senate after a similar lower house vote late Wednesday, opens the door for development of up to US$30 billion worth of oil and gas projects.

It is a crucial deal for East Timor, which became independent only last year and is struggling to pay for badly needed development projects.

The treaty gives East Timor 90 percent of tax revenues generated by the development of gas and oil resources in a 62,000 square kilometer (24,800 sq mile) "joint development area" in the Timor Sea. The remaining 10 percent goes to Australia.

The treaty ratification came just ahead of a March 11 deadline set by oil giant ConocoPhillips, operator of the joint development area's main Bayu-Undan gas field.

Failure to meet the deadline would have meant ConocoPhillips could not honor $1 billion contract to supply gas to Japanese customers beginning in 2006.

Australian officials hailed the accord as crucial to the development of East Timor, which is expected to earn about $3 billion from the Bayu-Undan project.

But the government came under sharp criticism for holding up ratification until East Timor agreed to its terms for developing the far larger Greater Sunrise gas field, which lies mostly outside the joint development area and is worth some $12 billion.

Foreign Minister Alexander Downer flew to East Timor Thursday to sign the Greater Sunrise deal, known as the International Unitization Agreement.

After intensive negotiations on the agreement, East Timor finally agreed to accept revenues on the basis that only 20.1 percent of the Greater Sunrise field lies within the joint development area and so is subject to the 90-10 share-out with Australia.

Australia gets all the revenue from the other 79.9 percent of the field.

Australia claimed 80 percent of Greater Sunrise under the terms of a maritime treaty signed with Indonesia when it occupied East Timor.

But after East Timor became independent, it claimed a far greater part of the field lay within its maritime boundaries.

Senior Timorese officials told Australian newspapers they agreed to the Australian terms only after Prime Minister John Howard threatened to block ratification of the Timor Sea Treaty if they did not give in.

"It was an ultimatum," a senior official close to East Timor Prime Minister Mari Alkatiri was quoted as saying. "They were treating (Alkatiri) as if he was a child and he is offended."

Opposition Australian lawmaker Bob Brown of the Greens party was expelled from Thursday's Senate session for accusing Howard of using blackmail against East Timor.

"The Australian government and the prime minister have been involved in blackmailing the people of East Timor," Brown said.

Downer denied Australia had bullied its tiny neighbor into submission.

"Obviously, there's been lively discussion between officials as this negotiation has proceeded, but it's come to a very successful conclusion and in the end we think it's a fair compromise between Australian interests and East Timorese interests," Downer said.

But he admitted Howard called his East Timor counterpart Wednesday "to try to encourage the East Timorese Council of Ministers to consider the unitization agreement before the end of the week."