ConocoPhillips threatens to quit Bayu Undan over treaty snafu

In what would be a devastating blow for the people of East Timor and Darwin, reports have emerged that US petroleum giant ConocoPhillips has threatened to quit the $3.5 billion Bayu-Undan natural gas project in the Timor Sea because Australia and East Timor have so far failed to finalise a treaty on sharing royalties from the project.

"ConocoPhillips regards the ratification of a treaty between Australia and East Timor as extremely urgent," a company spokesperson told the Australian Financial Review.

"We are hopeful this will take place within the first two weeks of the new parliamentary year (3 February), but this is really crunch time as we've got the customers breathing down our neck."

ConocoPhillips is contracted to supply 3 million tonnes of liquid natural gas a year to Tokyo Electric Power and Tokyo Gas from January 2006.

Despite the slow progress, the Australian government is confident of ratifying the treaty within weeks. A major sticking point is a desire by Australia to conclude a separate international unitisation agreement covering another LNG field known as Greater Sunrise, 20% of which falls within the Joint Petroleum Development Area between Australia and East Timor.