E. Timor set to reap US$3.1b after gas deal approval
E. Timor set to reap US$3.1b after gas deal approval
Agence France-Presse, Sydney
Impoverished East Timor is set to earn US$3.1 billion in oil and gas tax royalties following the clinching of an deal between U.S.-based Phillips Petroleum and two Japanese gas companies.
Phillips' Australian subsidiary, Darwin LNG, has struck an agreement to sell three million tons annually of liquefied natural gas (LNG) from the Bayu-Undan project in the Timor Sea over 17 years to Japan's Tokyo Electric Power Co. (TEPCO) and Tokyo Gas Co. (TGC).
Darwin LNG said the project still needs the endorsement of the Australian government.
The office of Australian Treasurer Peter Costello and the Foreign Investment Review Board routinely assess the impact of offshore investors in specific projects affecting the "national interest".
"Gas deliveries from the field are expected to begin in late 2005, Darwin LNG said in a statement.
"This agreement commits nearly 100 percent of the proven reserves of this field."
Australia's share of royalties from the project over the 17 years is anticipated to be around A$2 billion, while East Timor will receive A$6 billion.
The total cost of the project will be around US$3 billion, including the construction of a pipeline connecting the Bayu- Undan field with a giant LNG plant to be built near the northern Australian city of Darwin.
The president of Darwin LNG, Stephen Brand, described the agreement as "a major milestone in realizing the full value of the Bayu-Undan field to the mutual benefit of East Timor, Australia and the field participants.
"Development activities can immediately begin for both the LNG plant and pipeline projects."
The Bayu-Undan field contains estimated reserves of 400 million barrels of condensate and liquefied petroleum gas and 3.4 trillion cubic feet of natural gas. It lies about 500 kilometers (300 miles) northwest of Darwin and 250 kilometers south of Suai in East Timor.
Phillips, the major stakeholder in the project, shelved the project last August in a dispute over East Timor's tax regime, citing a corporate tax rate of at least 40 percent as a major disincentive to continuing its efforts to exploit oil and gas reserves in the Timor Sea.
East Timor has been administered by the United Nations since its bloody 1999 secession from Indonesia but is due to become independent on May 20.
The earlier delay in the pipeline project threatened an estimated US$6.5 billion worth of downstream investment in both East Timor and Australia.