Phillips Petroleum shelves East Timor gas pipeline
Phillips Petroleum shelves East Timor gas pipeline
SYDNEY (Agencies): Phillips Petroleum announced Wednesday the
indefinite shelving of plans to build a US$750 million gas
pipeline between East Timor and Australia.
The decision also jeopardizes $6.5 billion worth of downstream
investment in both the fledgling United Nations-administered
territory and Australia.
Phillips cited East Timor's tax regime, which would be levied
at a rate of more than 40 percent, as a major disincentive to
continuing its involvement in efforts to exploit oil and gas
reserves in the Timor Sea.
"Basically it's issues that revolve around whether or not the
investment environment is being maintained in this region and at
the present time, that investment environment is not attractive,"
a Darwin-based Phillips executive, Jim Godlove, told the
Australian Broadcasting Corporation.
Australia and East Timor signed an agreement last month
granting the former Indonesian province 90 percent of royalties
from oil and gas reserves in the Timor Sea, which separates the
two countries.
US-based Phillips Petroleum, which is the key stakeholder in
several joint ventures in the area, said "certain critical legal,
fiscal and taxation issues" had created an "onerous regime" for
investors.
"The deferral reflects the need to resolve certain critical
legal, fiscal and taxation issues arising from the Timor Sea
arrangement, entered into between the governments of Australia
and East Timor on July 5, before further investment can proceed
in either the pipeline or in any gas or liquefied natural gas
development," the company said in a statement.
Phillips has significant interests in the Sunrise, Elang-
Kakaktua and Bayu Undan oil and natural gas projects.
East Timor's bloody secession from Indonesian rule in 1999
meant a previous agreement between Canberra and the Suharto
regime in Jakarta dividing royalties equally was nullified.
Its economy is now largely propped up by key aid donors, such
as Australia, former colonial power Portugal and the United
Nations.
Under the terms of the revised agreement between East Timor
and Australia, East Timor will receive more than A$7 billion
(US$3.64 billion) in revenue from existing and planned
developments in the Timor Sea over the 20 years from 2004.
The Australian government Wednesday said that it is
disappointed by Philips' decision.
Foreign Minister Alexander Downer and Resources Minister Nicka
Minchin said Wednesday the decision to defer is due to
uncertainty about the legal and fiscal regime in the Timor Gap
area resulting from tax proposals put forward by the United
Nations Transitional Administration in East Timor.
"Australia shares many of industries' concerns," the ministers
said in a statement.
"It is unfortunate that just hours after we agreed the Timor
Sea Arrangement in Dili (July 5), Untaet/East Timor announced
that it would use its taxation powers to recover up to an
additional US$500 million in tax from the companies," they said.