Production accords for Timor Sea may change

Production accords for Timor Sea may change

CANBERRA (Bloomberg): Australian oil and gas companies could
be forced to renegotiate their production agreements in the Timor
Sea if Indonesia provides any form of autonomy for East Timor, an
industry executive said.

Australia's opposition Labor Party has said it plans to
support self-determination for the Indonesian province if it
wins government in the Oct. 3 national election.

"If (East Timor) took on all the obligations that Indonesia
takes on, the situation in the Timor Gap would be unchanged,"
said Barry Jones, executive director of Australian Petroleum
Production and Exploration Association.

"If they said they were abolishing the treaty, then you'd go
back to negotiating."

Any form of autonomy for East Timor would affect the Timor
Sea "zone of cooperation" providing for shared oil revenue from
the fields which lie between the province and Australia's north
coast.

Australia negotiated the agreement with Indonesia in 1989 as
part of the Timor Gap treaty which might no longer be legally
binding.

Labor, neck and neck with the incumbent Liberal-National
coalition in the latest opinion polls, has said it will negotiate
a new treaty with East Timor if that happens.

"The Timor Gap treaty is between Indonesia and Australia but
there's nothing that... would be an obstacle to East Timor
standing in the shoes of Indonesia," the Labor Party's spokesman
for foreign affairs, Laurie Brereton, said Thursday.

Australian resources and energy companies such as Broken Hill
Proprietary Ltd. and Santos Ltd. have developed oil and gas
fields in the Timor Sea, including the Bayu Undan and Elang
Kakatua projects.

Change of Heart

Australia's Labor government under Gough Whitlam was seen to
condone East Timor's integration into Indonesia in the 1970s, and
Australia was the first country to legally recognize Indonesia's
incorporation of the former Portuguese territory.

Petroz NL, a medium-sized Australian oil and gas company with
a stake in both Bayu Undan and Elang Kakatua, is keeping a close
eye on political developments in Indonesia and Timor. Still,
Managing Director Rod Brown says he's not concerned.

"I don't think it will impact on oil and gas companies,"
Brown said. "I'd be surprised if the terms of the treaty were
different with East Timor."

Under the Timor Gap Treaty, revenue from those projects is
shared with the Indonesian government. East Timor was integrated
into Indonesia in 1976, and Indonesia has indicated it will allow
autonomy in the province, though not on economic or defense
matters.

Analyst Paul Ashby at ABN Amro said Indonesia isn't likely to
grant independence for East Timor anytime soon.

"Indonesia is in a lot of trouble economically and there's a
lot of revenue going to come spinning out of that region in the
next ten years," he said. "I don't think Indonesia is likely to
give up one dollar of that to Timor."