Australian parliament approves Timor-Leste border treaty

CANBERRA has approved the Timor-Leste maritime border treaty, with the legislation to end the decades-long dispute finally passing both houses of parliament on Monday night after Dili signed it into effect last week.
Australian parliament approves Timor-Leste border treaty Australian parliament approves Timor-Leste border treaty Australian parliament approves Timor-Leste border treaty Australian parliament approves Timor-Leste border treaty Australian parliament approves Timor-Leste border treaty

Paul Hunt

Senior Journalist: Energy & Commodities

Paul Hunt


The treaty was first signed in March last year by both nations' foreign ministers at United Nations headquarters in New York and apart from demarcating a final and agreed boundary also mandates how revenue from oil and gas fields, including the giant Sunrise gas field are carved up between the two.  

In passing the treaty parliament made way for Prime Minister Scott Morrison to officially sign it at his next visit to Timor-Leste next month.

 "This treaty is an historic achievement for Australia and Timor-Leste and its implementation is firmly in Australia's national interest," foreign minister Marise Payne said in parliament last night.

"Through this treaty, Australia and Timor-Leste have settled a long-running dispute over our maritime boundaries, agreed upon a pathway for the development of Greater Sunrise and laid the foundation for a new chapter in our bilateral relations."

Under the treaty Timor-Leste will hold the rights to the largest share or revenue from the Greater Sunrise field and will pocket 80% of the revenue from the field should the gas be processed in Australia and 70% if it is processed onshore Timor-Leste.

Morrison said the parliament's decision to approve the treaty would establish a "stable legal framework" for the development of oil and gas in the Timor Sea.

"It upholds Australia's commitment to international rules and the peaceful resolution of disputes, and reflects our full commitment to the independence, sovereignty and economic sustainability of Timor-Leste," Morrison said.

"With the passage of the treaty's implementing legislation today, Australia is now ready to partner with Timor-Leste to jointly develop the Greater Sunrise gas fields for the benefit of both countries."

The Timor-Leste government has been pushing to have the gas processed at an LNG plant on its southern coast.

The Tasi Mane project includes plans for an LNG plant, a refinery, an industrial base, seaports, an airport and a highway linking them all along the entire south coast which could cost around US$16 billion to develop, which is also close to the value of the sovereign wealth fund it plans to use to fund the development.

The price hasn't deterred the government which is seeking development money from foreign banks and investors - including Chinese banks.

State oiler Timor Gap estimate the Greater Sunrise field could provide A$75 billion in revenue. The nation is almost entirely reliant on oil and gas for its revenue, largely from the near-empty Bayu-Undan field that feeds the ConocoPhillips-operated Darwin LNG plant.

The small nation bought out two of the other partners in Sunrise last year, and now has a 56.5% share, leaving Woodside as operator despite the Perth oiler's initial reluctance for Dili's vision for the project.

Woodside CEO Peter Coleman has said the company is willing to operate any LNG plant but will not put money towards building it.

In a statement provided to Energy News today a Woodside spokesperson reiterated that negotiations over the Sunrise Joint Venture and Greater Sunrise Production Sharing Contract were ongoing.

The treaty will also affect some smaller operators, including Carnarvon Petroleum, which holds a 100% stake in the Buffalo oil field which will now lie across both Australian Commonwealth waters and Timor-Leste waters.

The approval of the treaty now means Carnarvon can continue its development plans for the field and look for a farm-in partner with confidence.

Buffalo was originally developed in 1999 by BHP with four wells tied back to a FPSO. Production rates from the field sat at around 50,000 barrels of oil per day and  Carnarvon acquired its interest in the Block in 2016.

Dili hopes Buffalo may fill its coffers in the period between shutdown of Bayu-Undan and ramp up of Sunrise.

Carnarvon Petroleum COO Philip Huizenga told Energy News this morning that the company had agreed to a production sharing contract with Timor-Leste authorities and was looking forward to the formal ratification of the treaty taking place.

 "The two governments and all of the oil companies involved have put in a lot of work behind the scenes to get to this stage," Huizenga said.  

"This is great news for Carnarvon because it allows us to put our heads down and focus on getting a well drilled into the Buffalo field."

The treaty is expected to be officially signed and come into effect on August 30, a date that marks the 20th anniversary of the 1999 UN-sponsored referendum that led to Timor-Leste's independence in 2002.