Canberra, Jakarta try to solve Timor Gap rift
Canberra, Jakarta try to solve Timor Gap rift
PERTH (Reuters): Australia and Indonesia are set to seek a resolution to differences stemming from upcoming gas production in the Timor Gap seabed when resource ministers from the two countries meet next week.
Australian Prime Minister John Howard said in Jakarta on Wednesday he hoped any differences between the two countries would be resolved equitably.
A key issue still to be resolved is how royalties from the giant Bayu-Undan gas field, discovered by The Broken Hill Proprietary Co Ltd and Phillips Petroleum Co in the Zone of Cooperation (ZOCA) with Indonesia, will be administered.
The treaty provides for equal royalty rights for both countries within ZOCA but is silent on Indonesian royalty rights for raw gas transported from the zone and processed into higher- value liquefied natural gas.
Sources said BHP managing director John Prescott briefed Howard on the issue before his meeting with Indonesian President Soeharto.
The meeting is scheduled to take place in the Australian city of Cairns between Australian Resources and Energy Minister Warwick Parer and his Indonesian counterpart Ida Bagus Sudjana to review the treaty.
"They have an annual meeting. They review operations and discuss any problems that might come up," a Parer spokesman said.
Less likely to be resolved at the meeting are differences between BHP and Phillips over the location of a proposed LNG plant to service the region.
"That's a commercial decision," the spokesman said.
Phillips favors running a pipeline from the field to Darwin where the gas processing will be processed onshore. BHP wants to build the plant on a nearby reef about 500 kilometers offshore using its patented gravity-based anchoring technology.
Two other options are building an LNG plant on Indonesia's Timor island or processing the gas into methanol in Darwin.
Bayu-Undan, which is estimated to contain proven and probable gas reserves of 3.1 trillion cubic feet of gas and about 400 million barrels of hydrocarbon liquids, will require A$1 billion on facilities expenditure for initial output in 1998.
The BHP/Phillips consortium plans a plant with capacity of up to three million tons per year and a production start of around 2003.
Australia and Indonesia signed the ZOCA agreement in 1989 to divide the seabed between northern Australia and Timor island into two separate and one jointly-managed exploration zones.