U.S. firm signs deal on East Timor gas pipeline

U.S. firm signs deal on East Timor gas pipeline

Associated Press, Dili

U.S. energy company Phillips Petroleum Pty. Ltd. said Friday it had reached agreement with East Timor on a planned multibillion dollar gas pipeline from the Timor Sea to Australia.

The deal comes five months after Phillips shelved the pipeline when new financial issues were raised in the Timor Gap agreement between Australia and the United Nations Transitional Authority in East Timor (UNTAET).

Phillips and its co-venturers welcomed the East Timor Council of Ministers' decision to endorse a tax and fiscal package Friday that will see East Timor receive more than US$3.6 billion in royalties over 20 years from the Timor Sea oil and gas fields.

The 500 kilometer (310 mile) pipeline - which will link Darwin with the Bayu-Undan gas field under the sea between Australia and East Timor - will also underpin A$13 billion ($6.5 billion) in investment in Australia.

"This marks a historic day in the establishment of the Timor Sea as an important emerging gas development area," Phillips president Stephen Brand said in a statement.

"We now await ratification of the agreement by Australia so we can proceed with finalizing gas sales arrangements that will secure project development," he added.

The field contains an estimated 400 million barrels of condensate and liquefied petroleum gas and 3.4 trillion cubic feet of natural gas.

When the agreement fell through earlier this year, the new East Timor administration had intended to use its taxation powers to claw back generous investment incentives offered under the original treaty between Australia and Indonesia.

Phillips had insisted that business conditions under the new agreement with the newly independent East Timor be no more onerous.

Before East Timor became independent, Australia shared Timor Gap revenues 50-50 with Indonesia.