Timor Gap gas agreement in the pipeline: Official

Timor Gap gas agreement in the pipeline: Official

CANBERRA (Dow Jones): Australia is confident resolution of
outstanding taxation issues in a treaty covering rich undersea
gas deposits in the Timor Gap zone of cooperation will be
achieved by the end of 1998, an official said yesterday.

The Timor Gap treaty signed by the two nations in 1989
established a joint authority to manage exploration and
exploitation of the increasingly abundant oil and natural gas in
the region.

"The treaty deals quite adequately with the development of oil
projects, but the possibility of (liquefied natural gas) plants
wasn't something that was taken into account when the treaty was
negotiated," the official, who is familiar with the talks but who
declined to be named, told Dow Jones Newswires.

In particular, the issues relate to taxation and royalty
payments by companies that develop gas projects in the treaty
area and how these payments can be shared on a fair and equitable
basis.

Broken Hill Proprietary Co. and Philips Petroleum Co. (P) are
developing the Bayu-Undan LNG project in the Timor Sea zone of
cooperation area A, the area managed by both nations, a project
that could include a floating LNG production platform.

The zone of cooperation is divided into three areas: area A,
area B managed by Australia and area C managed by Indonesia.

Shell Australia Ltd., a unit of Royal Dutch/Shell Group (RD)
and Australia's Woodside Petroleum Ltd. (A.WPL), are considering
the development of the Sunrise/Troubador gas fields, known as the
North Australian Gas Venture, also in area A.

Ministers from the two nations reached an "amicable agreement"
late 1997 on the principles to be used in resolving the issues,
the official said.

They then targeted final agreement on details of the matter by
March 1998, to enable companies to step up marketing efforts.

But that deadline wasn't met and negotiations then ran into
the political turmoil that erupted in Indonesia in April and May.

Since then a new Indonesian Mines and Energy minister, Kuntoro
Mangukusubroto, has been appointed.

"The process now is back on track and we would anticipate the
outstanding issues being finalized by no later than the end of
this calendar year," the official said.

There have been a number of major discoveries in the zone of
cooperation this decade and the area remains under active
exploration by some of the world's major energy companies.

The Australian official was commenting after media reports
BHP's senior oil representative in Indonesia visited East
Timorese resistance leader Xanana Gusmao, where he is being held
in a Jakarta prison for political reasons.

The reports said Gusmao assured BHP an independent East Timor
would initially honor the rights awarded to mining companies
under the Timor Gap treaty.

East Timorese resistance leaders, who have been fighting for
independence from Indonesia since it annexed East Timor in 1975,
previously have said the treaty is illegal.

The Australian official said the East Timor issue isn't
directly related to negotiations about tax and royalty matters.

"How Indonesia chooses to handle its receipts from these
projects as these progress is a matter for Indonesia," he said.