Companies operating in the oil and natural gas rich Timor Gap include some of the largest multinational and Australian-based energy corporations. Anglo-Dutch giant Shell, US-based Phillips Petroleum and Australian players such as Woodside Energy and Santos stand to make huge profits from oil and gas reserves that rightfully belong to the long-suffering people of East Timor.
As negotiations continue between the Australian government and the United Nations Transitional Administration in East Timor (UNTAET) over the future of the contentious Timor Gap Treaty, these corporations are playing a significant role in shaping Australian foreign policy towards East Timor.
One of the main motives behind successive Australian governments' support for the Indonesian occupation of East Timor was the knowledge that huge reserves of oil and gas existed beneath the Timor Sea, much of it in the area known as the Timor Gap.
Prior to the Indonesian military's invasion of East Timor in 1975, Prime Minister Gough Whitlam's Labor federal government adopted the view that it could strike a better deal for Australian-based companies with the Suharto dictatorship rather than with an independent state of East Timor. Now, as then, mining and exploration corporations are pressuring the federal government to safeguard their investments and developments.
In addition, there is the anticipated revenue from downstream projects reliant on Timor oil and gas (revenues potentially much greater than that derived from exploration itself). At present, there is a rapid privatisation of the energy industry in Australia, with the gas sector set to play an important part in this process.
As a "reward" for maintaining "investor confidence" in this way, the Australian government hopes to protect its share of royalties generated from oil and gas production in the Timor Gap.
Revenue for Australia
Timor Gap reserves are considered crucial in meeting increased Australian energy needs and supplement Australia's energy exports. The Australian Bureau of Agricultural and Resource Economics forecasts that natural gas consumption will grow from 20% to 28% of Australia's primary energy consumption over the next 15 years. Liquid natural gas was Australia's third largest energy export in 1998-99.
Some estimates by industry analysts in early 1999 — when the price of oil was considerably lower than it is today — forecast that during the production life of the Timor Gap fields, the total gross un-discounted revenues would be at least US$11 billion.
Other than the key factor of the price of oil, the terms of a renegotiated Timor Gap Treaty could affect how much profit can be made. It is not an unlikely scenario, for example, that an independent East Timor will be pressured to lower company taxes and other charges on exploration in its territorial waters.
If, during the transition period, UNTAET negotiators and the East Timorese leadership are successful in having the maritime boundary redrawn along the half-way line between East Timor and Australia (currently delineated by the southern boundary of Area A in the zone of cooperation) it would result in the transfer of a huge amount of resources and territory to East Timor.
This will mean East Timor would be the sole recipient of royalties from developments north of the half-way line, which under the present terms of the Timor Gap Treaty are split 50-50 with the Australian government. Again, estimates vary on how much these royalties will amount to, though UN and World Bank officials have recently stated that it is in the order of US$100-150 million per year for a period of 20 years or longer.
The most significant known reserves of oil and gas in the Timor Sea are located within Area A, or very close to it. Changes to the maritime boundary could mean that oil and gas fields currently in Australian territory, such as those close to or on the eastern and western boundaries of the Timor Gap, would come under East Timor's sovereignty. Indonesia may also push for new border arrangements for areas either side of the gap, given that it felt duped after maritime border negotiations with Australia in 1971 (and hence the 10-year cycle of talks before the signing of the Timor Gap Treaty in 1989).
The largest reserve located solely within the Timor Gap is the Bayu-Undan field, with recoverable reserves in excess of 96 billion cubic metres of gas and 400 million barrels of liquid petroleum gas and condensate. The gas recycling project will cost around $2.7 billion dollars, with the first phase of production expected to take place by 2003.
Partners in crime
Phillips Petroleum, the major shareholder in this project, is one of the largest petrochemical companies in the US, with some US$22 billion in assets. In 1999, Phillips generated around US$14 billion in revenue from its worldwide operations. Phillips bought out BHP's interests in the Timor Gap in April 1999 for between $200 million and $320 million.
To develop the Bayu-Undan field, Phillips has been joined by partners Santos (Australia's largest onshore gas developer), Inpex (a Japan-based company with extensive interests throughout Indonesia), Kerr-McGee (another US-based petrochemical corporation), British Borneo (taken over in March by the big Italian-based energy corporation Eni, which ranks second in Europe for domestic gas sales) and Petroz (a smaller Australian-based company).
The only commercially operating project in the Timor Gap at the moment is the Elang/Kakatua field. Though a small field, the size of the reserves have recently been revised upwards and it is a tidy earner for the companies involved (Phillips, Santos, Inpex and Petroz).
Around 30 kilometres from the western boundary of Area A is the lucrative Laminaria/Corralina field, operated by Woodside (with Shell and BHP), which produces up to 150,000 barrels of oil a day. Woodside posted record profits this year, largely due to the high price of oil and the success of the Laminaria project.
Straddling the eastern boundary of Area A is the Greater Sunrise field, which holds a massive 259 billion cubic metres of gas — more than twice that of Bayu-Undan. It is being developed by Phillips and the Northern Australian Gas Venture (NAGV is a joint venture between Shell and Woodside). According to the Northern Territory government's Office of Resource Development, the development of Greater Sunrise and associated infrastructure will involve a capital cost of $10 billion, the largest ever capital investment in the NT.
It is envisaged that gas from Greater Sunrise will supply a synthetic gas plant to be built near Darwin by the Canadian fuel corporation Methanex, the world's largest producer and marketer of methanol. In June, the federal government afforded the Greater Sunrise and Methanex development "major project" status, ensuring that it is fast-tracked and faces less-stringent environmental and native title requirements (the area earmarked for the Methanex plant is located on land administered by the Northern Land Council).
Both Phillips and NAGV initiated feasibility studies in 1999 on the supply of gas from the Timor Sea to markets in Australian eastern seaboard and southern Australia. NAGV linked up with the large US conglomerate, Duke Energy (10th largest energy company in the world) while Phillips teamed up with Australia's largest pipeline specialists, Epic Energy (which owns $3.5 billion worth of pipeline assets).
Campaign
Action in Solidarity with Indonesia and East Timor (ASIET) has called on all supporters of East Timor to campaign against the Howard government's refusal to return the territory and royalties it has gained illegally through the Timor Gap Treaty. ASIET committees are planning pickets and actions on December 11, the date on which foreign ministers Gareth Evans and Ali Alatas signed the treaty in 1989.
ASIET will also propose to affiliates at the coming conference of the Asia-Pacific Coalition for East Timor that a region-wide campaign be launched in support of UNTAET's and East Timor's call for a new maritime boundary and an increased share of royalties.
BY JON LAND
[Visit the ASIET web site at <http://www.asiet.org.au> for more information.]