East Timor Sets Up Fund for Nation's Oil, Natural Gas Royalties
East Timor Sets Up Fund for Nation's Oil, Natural Gas Royalties
Angela Macdonald-Smith Bloomberg/Sydney
East Timor set up a petroleum fund for the management of the three-year-old nation's revenue from crude oil and natural gas production, in the expectation this will provide the country with a stable flow of income.
The fund has started with a balance of almost A$250 million, from petroleum royalties accumulated since 2000, and may increase to more than A$5 billion over 20 years, Prime Minister Mari Alkatiri said in a statement e-mailed from the capital, Dili. The fund invests in low-risk U.S. government bonds, he said.
East Timor, or Timor-Leste, broke away from Indonesia, Southeast Asia's biggest oil producer, in May 2002 after a 24- year armed struggle. The country receives 90 percent of royalties from oil and gas fields in an area jointly administered with Australia that includes ConocoPhillips's A$1.8 billion Bayu-Undan gas liquids project.
"Increased spending must be used wisely to invest in key government services and infrastructure," Alkatiri said. The government will "in time" consider a more diversified investment policy, he said.
Royalty flows into the fund are set to increase once ConocoPhillips starts producing natural gas from Bayu-Undan for processing into liquefied natural gas at a $1 billion plant due to start up in Darwin in the first quarter. Woodside Petroleum Ltd., Australia's second-biggest oil and gas producer, said this week it's considering options to develop the Jahal and Kuda Tasi oil fields, which also lie in the jointly administered waters.
East Timor is seeking investment in oil and gas exploration in its wholly administered waters and last month invited bids for exploration licenses in its first auction of drilling rights. Australia and East Timor are also close to an agreement on dividing royalties from Woodside's stalled A$3.7 billion Sunrise gas project, part of which lies in the jointly administered waters, John Griffiths, director general of Australia's offshore resources, said last week in Paris.