East Timor and Australia negotiate gas agreement

East Timor and Australia negotiate gas agreement

Foreign Affairs Minister Penny Wong’s hand-picked negotiator, former Victorian Premier Steve Bracks, confirmed a “significant offer” had been made.

“This demonstrates the Australian Government’s determination to get this project underway because we believe it is in the best interest of Timor-Leste and its people for this project to move forward,” Bracks said.

“We don’t want to pressure (Timor-Leste) to the point where they need to even think about going to China.”

Australian government negotiator Steve Bracks

He said Australia wanted Timor-Leste to see it as the international “trusted partner”.

“We don’t want to pressure them to the point where they have to even think about going to China.”

The 50 billion dollar question

But the unresolved issue is where the gas from the Greater Sunrise reservoir would be piped and processed.

East Timor expects the gas to be shipped and processed in Darwin.

East Timor expects the gas to be shipped and processed in Darwin. Credit: Dominic Lorrimer

Under a 2018 treaty between the nations signed in New York, if the gas field is processed in Timor-Leste, Australia would receive 30 percent of the revenue and Timor 70 percent.

But if the gas is piped to Australia and processed at an existing LNG processing plant in Darwin, the Timorese share would rise to 80 per cent, with Australia receiving 20 per cent.

This treaty was reached after Timor abandoned an earlier agreement when it emerged that Australian spies had harassed the Timorese parliament to gain the upper hand in negotiations two decades ago.

There is up to $50 billion worth of gas in the Greater Sunrise field.

How would any of the proposals work?

Gusmao’s preference is to process the gas on the south coast of East Timor, believing the industrial and job opportunities would outweigh the additional revenue from the Darwin alternative.

“We don’t want an oil pipeline just for the sake of it,” said the Timorese president, José Ramos-Horta, to this newspaper.

“A pipeline to East Timor would drive diversification…industrialization and modernization of our economy.”

But many oil and gas analysts and experts believe the Timor option is commercially unviable and the project will remain unrealized unless the gas is processed in Darwin.

As a possible incentive, Timor-Leste could be offered an equity stake in the Northern Territory gas facility.

Ramos-Horta said he believed that compared to the “stratospheric” cost of Australian taxes and labor, the Timor option would not be more expensive.

“I am personally willing to read the document and, if it is persuasive enough, if it is enticing enough, if it really demonstrates beyond a doubt that this is the best option for Timor-Leste, I am sure that the government will consider that.” , said.

Steve Bracks said: “We still don’t know if it would be viable for (Greater Sunrise) to take place in Timor Leste.”

“It very well could be and if that is the case then all the support we can give in Australia will be given to this project to see it through.”

In Timor there is growing urgency to establish the project, which would last 30 years. Bayu-Udan, Timor’s most valuable oil and gas field, has been depleted, leaving it without oil revenue.

As an additional incentive, Australia has committed to consider using Bayu-Undan for carbon capture and storage of greenhouse gases emitted by Darwin processing. That would be another source of financing for Timor-Leste.

So what about China?

Ramos-Horta said Australia should not worry about Timor’s relationship with China, saying Beijing was “just an economic trade competitor”.

“I have had conversations with the Chinese for many, many years. “They are very sensitive and they don’t want the Australians or the Americans to perceive that they have ulterior motives in Timor-Leste,” Ramos-Horta said.

“So there is no reason for Australia and the United States to always pick on China as if China is going to take over the world.

“China might want to have global dominance in technology, in trade, but not necessarily in dominating and subjugated countries.”

Andrew Probyn is Nine News’ national affairs editor.