Australia says talks on Timor Gap tied to aid

Australia says talks on Timor Gap tied to aid

CANBERRA (Reuters): Australia hinted on Monday that the 50-50
split in oil revenues from a joint offshore exploration area in
the Timor Sea could be adjusted in favor of East Timor.

"We'll be looking to see whether that arrangement is entirely
appropriate for the new and struggling country of East Timor,
that obviously is one of the significant issues," Australian
Foreign Minister Alexander Downer told reporters.

Talks between Australia and East Timor on revenues from the
disputed Zone of Co-operation in the Timor Sea began on Monday in
Dili, with East Timor seeking up to 90 percent of the funds based
on border claims that put key petroleum projects in its waters.

The Timor Gap Treaty, originally signed between Australia and
Indonesia, evenly split revenues from the zone after the two
countries could not agree on a border.

But the treaty must be renegotiated following East Timor's
vote for independence last year.

But Downer said Australia could tie the issue of royalties in
the Timor Sea to the future level of development aid it has
earmarked for the emerging country.

"The extent to which East Timor itself is able to get the
royalties, or a share of the royalties, the size of its share,
plays into the overall size of the Australian aid program in East
Timor and so on," Downer said.

"So there are a lot of issues tied up together here."

The border alongside the Zone of Co-operation is a sensitive
issue as several major gas and oil deposits lie just outside
Indonesian territory in Australian waters, including the 140,000
barrels per day Laminaria project.

Australia has said the first round of talks will be more about
royalties as East Timor is not yet a sovereign country with the
right to negotiate boundaries.

Some industry analysts say Australia could give more than 70
percent of the royalties to East Timor, reflecting the equal
validity of its claim and political pressure to help a country to
which it has already given millions of dollars in aid.

Downer said a smooth and speedy negotiation, rather than a
border dispute locked up in international courts for years, is in
everyone's best interest.

He dismissed talk of the possible involvement of the
International Court of Justice in the dispute.

"As far as the International Court of Justice is concerned, I
think from my reading of the newspapers this morning, is more of
a throw-away line from Peter Galbraith, who is the U.N. official
responsible for the negotiations, rather than something we would
want to overshadow negotiations," he said.

Meanwhile, Dow Jones, reported that U.S.-based Phillips
Petroleum Co. had awarded another seven key supply and
installation contracts for the Bayu-Undan natural gas and liquids
project in the Timor Sea.

Phillips said two of these contracts were awarded to South
Korea's Hyundai Heavy Industries Co. for various topside
equipment for the offshore platform.

Singapore-based Sembawang Marine & Offshore Engineering will
supply wellhead platform and topsides, while McDermott Industries
Pty. Ltd. of Australia was awarded contracts to supply some
subsea gear.