E. Timor backs project, demands treaty review

E. Timor backs project, demands treaty review

DARWIN (Reuters): East Timorese leaders have backed the A$1.4
billion (US$896 million) Bayu-Undan gas project, an important
part of the broken territory's economic reconstruction, but
warned on Wednesday key treaty areas must be renegotiated.

Project partner Petroz NL said operator Phillips Petroleum Co
had received a letter signed by East Timorese leaders Xanana
Gusmao, Jose Ramos-Horta and Mari Alkatiri saying they would
honor Timor Gap petroleum zone arrangements.

"Yes, it was sent...but that doesn't mean we have already
accepted the treaty as it is," Alkatiri told Reuters.

The Timor Gap treaty was signed by Australia and Indonesia in
1989. Indonesia invaded the territory in 1975 and East Timorese
leaders regard Jakarta as an illegal signatory.

Alkatiri is a member of the seven-man East Timorese
Transitional Council working with the United Nations, which is
soon to take over full civil administration and peacekeeping in
the battered territory after Indonesia withdrew last month.

He is also responsible for negotiations on the Timor Gap,
which is divided into five administrative areas with varying
degrees of responsibility between Australia and Indonesia and a
"Zone of Cooperation".

While the Bayu-Undan gas and condensate project could proceed
in the early stages, Alkatiri warned that maritime borders
between East Timor and Australia would have to be renegotiated.

"It's not a problem of oil and gas, it's a problem of maritime
borders, it's a problem between East Timor and Australia," he
said. "I think we have to redefine, renegotiate the border later
on when East Timor becomes independent."

The United Nations Transitional Administration in East Timor
(UNTAET) expects to be in place for between two and three years.

Australia's Northern Territory Resource Development Minister
Daryl Manzie said East Timor would succeed Indonesia as a treaty
signatory and that UNTAET would be responsible for the treaty's
administration until East Timor became fully independent.

"We've received a clear message from East Timor officials that
the treaty will be honored," Manzie told reporters.

Large parts of East Timor were destroyed in a wave of violence
by vengeful pro-Indonesia militias in September after an August
vote for independence.

The World Bank is leading an assessment mission to determine
what East Timor needs for its massive task of rebuilding after
the violence. East Timorese leaders have eyed natural resources
like gas as potential export earners.

Alkatiri would not say how important the Bayu-Undan project
would be to the fledgling East Timor economy because of
disagreements over the level of gas reserves.

Petroz estimates there are probable reserves of 325 million
barrels of condensate and LPG and gas reserves amounting to 3.4
trillion cubic feet.

"I would prefer not to talk about the importance of the
project to East Timor itself because we have some contradictory
information...there is still a big discrepancy," he said.

Production is expected to begin in late 2003 or early 2004.

Phillips' partners are Santos Ltd with 11.8 percent,
Indonesian Inpex Sahul Ltd with 11.7 percent, Kerr-McGee Corp
with 11.2 percent, Petroz with 8.3 percent, and British-Borneo
Oil & Gas Plc with 6.7 percent.