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."