E. Oil

Timor Leste, as one the poorest nations in the Southeast Asian region, has pinned much of its hopes for economic development and self-reliance on the off-shore gas and oil reserves in the Timor Sea. East Timor’s oil resources have historically attracted international interest, especially from Indonesia and Australia. On-going current negotiations and disagreements, however, continue between Timor Leste and Australia. This section provides a brief overview of the oil issue, which was also an aspect of the major powers’ acquiescence to Indonesian invasion of East Timor in 1975.

In December 1974 Portugal was already negotiating agreements on off-shore oil concessions in the Timor Sea with American oil companies -- Adobe Gas and Oceanic Company of Denver (Taylor 1994:37). These agreements were later reversed as a consequence of political lobbying by Australia. A year earlier, Australia and Indonesia had a tentative agreement on the maritime boundary in the Timor Sea already which could not be finalized as parts of it came under Portuguese Timor’s jurisdiction (ibid:38). Thus, in 1975 Australia seemed to support the integration of East Timor with Indonesia, in order to endure their access to maritime oil and wanted to rapidly secure the maritime boundary with Indonesia (ibid:75). BHP oil company was a strong Australian Oil interest lobbyer in this matter. In 1988, the Australian government has come to an agreement of cooperation with the Indonesian military on the exploitation of Timor Gap oil resources (ibid:164). Australian economic interests tended to influence their policy towards East Timor during the 1980s. On 11 December 1989 Timor Gap Treaty came into existence in which Indonesia and Australia divided the area into oil exploration zones (ibid:171).

This agreement continues to be renegotiated[1] between Australia and East Timor as a consequence of the country’s separation from Indonesia. Hill and Saldanha (2001:18) highlight some of the difficulties concerning the Timor Gap negotiations during the time of the UN transitional administration. For one thing the reserves were yet to be fully prospected. The maritime border between the two countries was yet to be settled. The royalty split was projected to be 85:15 percent in East Timor’s favour. This precipitated a rather optimistic projections for the annual economic growth rate of 15 percent for nine years by the World Bank mission in East Timor (Soesantro 2001:88). In 2001 many East Timorese felt that the 85:15 split was highly unfair and rather exploitative in nature for the new nation. During July 2001, prior to the Constituent Assembly elections, this issue was raised numerous times during public consultation and voter education meetings even in remote villages. The East Timorese people were keenly aware of the possible economic resources for their new nation, particularly oil. Even illiterate villagers were aware of the proposed 85:15 split and expressed their disappointment. Indeed, during my long-term election observation period I witnessed in one village in the Aileu district a ‘town hall meeting’ during a brief visit of a high ranking UN official. The main issue the villagers wanted the official to address was the oil resource issue and how East Timor can become self-sufficient in the future with such unfair and exploitative proposition.

Australia was not prepared for the robust negotiations by East Timor (http://www.aph.gov.au/library/pubs/bd/2003-04/04bd006.htm).  Formal negotiations began in October 2000 and Australia signed the New Timor Sea Treaty with a 90:10 split in East Timor’s favour on 20 May 2002. One sticky point however remained and that concerned the maritime boundaries. Australia strongly opposed the formerly negotiated boundaries with Indonesia. East Timor on the other hand bid for a boundary that was half-way between the two countries. East Timor wished that the International Court of Justice arbitrate the boundary dispute, however, Australia dismissed this and withdrew from ICJ section that deals with maritime boundary disputes two months prior to East Timorese independence. The boundary that East Timor desires would also aid in tripling its oil revenue. Article 22 of the Timor Sea Treaty that was signed in 2002 provides for a 30 year duration unless the boundary settled sooner between the two countries. Since the treaty was signed East Timor has argued that,


Under current principles of international law, it is entitled to a greater share of the Timor Sea’s oil and gas resources than is suggested by the boundaries of the Timor Sea Treaty’s Joint Petroleum Development Area (“JPDA”). Principally, East Timor Asserts that the western and eastern lines defining the JPDA are ill-founded at international law, a claim that has immediate implications for the joint venture partners in the Greater Sunrise fields that straddle the JPDA’s eastern boundary (Triggs and Bialek 2002:322-364; http://papers.ssrn.com/sol3/papers.cfm?abstracts_id=423323).


The boundary dispute is likely to be a complicated and drawn-out affair between the two countries. Earlier this year (2005), East Timor’s parliament refused to pass legislation to support the Greater Sunrise project until the dispute was resolved. The project was then put on hold by the global oil and gas companies (Woodside, Conoco Phillips, Shell and Osaka Gas). The Timor Sea Justice Coalition also spear-headed a community campaign for a just settlement from the Australian government. This coalition also estimates that if the boundary were half-way between the two countries, East Timor would gain substantial gas and oil royalties (about $40 billion).

Most recent negotiations have not settled the maritime boundary issue. However, it has been reported that Australia changed its original offer to East Timor from 18% to a 50% share of the royalties from the proposed development of Woodside Petroleum Group’s Greater Sunrise gas-condensate field. The final details of the negotiations and prospective deal are not yet available at the time of writing. However, on 17 May 2005 some news sources suggested that for a further $3.8 billion royalty revenue all East Timor would have to do is to defer any final maritime boundary settlement for fifty years (http://www.rigzone.com/news/article_pf.asp?a_id=22581; http://ogj.onlinearticles/article_display.cfm?Section=ONART&C=DriPr&article_ID=227974&p=7). East Timor as the cash-strapped and poorest nation of Southeast Asia might be thus forced into an inequitable settlement, depending on the negotiating tenacity of its leadership.


Rural Road conditions

Mota Bendera Water fall of Atsabe—below it, terraced dry agricultural fields





“Modernized” uma lulik from the Manufahi district


[1] http://www.etan.org/news/2002a/05gap.htm, http://www.aph.gov.au/library/pubs/bd/2003-04/04bd006.htm, http://papers.ssrn.com/sol3/papers.cfm?abstracts_id=423323 are just some of the websites from which documents concerning the New Timor Sea Treaty and arrangements can be obtained. News articles concerning the latest development on East Timor oil negotiations can also be found on websites that focus on international oil and oil exploration issues, such as rigzone and Oil and Gas Journal on line  -- http://www.rigzone.com/news/article_pf.asp?a_id=22581; http://ogj.onlinearticles/ .


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