The East Timorese government is refusing to accept a proposal by Australian-based exploration company Woodside Petroleum to develop the Greater Sunrise gas deposit in the Timor Sea with a huge floating processing plant. Despite heavy pressure from Woodside, with the backing of the Australian government, East Timor is adamant that the gas should be processed in East Timor.
Woodside announced the proposal on April 29, claiming it to be the most commercially viable option. However, this has been rejected by all sectors of the East Timorese political elite. The Xanana Gusmao-led Parliamentary Majority Alliance (AMP) and the leadership of the main opposition party, Fretilin, are united in demanding that the gas be piped from Greater Sunrise to East Timor.
Greater Sunrise is expected to generate at least $13 billion in revenue for both East Timor and Australia. Woodside has consistently argued that a deep-sea pipeline is not technically possible or is too expensive. East Timor has conducted its own independent surveys, which show otherwise.
Greater Sunrise contains the largest known gas deposit in the Timor Sea. It is located in an area long claimed by East Timor as wholly within its territory. Around 144 kilometres off the southern coast of East Timor, it is significantly closer to East Timor than to Australia.
Decision delayed
A decision on how the gas was to be processed was due at the end of 2009, but was delayed, allegedly while Woodside finalised its assessment. Over the same period, Royal Dutch Shell, which is a major shareholder in Woodside and holds a 27% stake in Greater Sunrise, was concluding negotiations with Samsung Heavy Industries (the world’s third largest shipyard) for the supply of up to 10 floating liquid natural gas processing plants, worth approximately US$5 billion each.
Earlier this year, Gusmao and other representatives of the AMP government publicly reaffirmed its position (and that of the previous Fretilin government) that the gas should be piped to East Timor for processing. In February, Woodside CEO Don Voelte accused East Timor of “negotiating through the newspapers”.
Following Woodside’s announcement of its intention to proceed with a floating platform and East Timor’s immediate rejection of this option, Voelte told the annual shareholders meeting in Perth on April 30: “The citizens of Timor-Leste are all, I suspect, going to wonder why their government doesn’t promote something that will improve their lives” and that the decision by East Timor was “premature”. A statement released by the East Timorese government in response to the floating platform announcement noted: “Woodside was acutely aware of the government’s position before today’s announcement, but chose to proceed regardless ... This is not only a source of great concern, but reflects an unacceptable level of arrogance.”
Unjust treaty
Unsurprisingly, the Rudd Labor government has come out in support of Woodside’s proposal, implying that East Timor is not abiding by its legal obligations under the Treaty on Certain Maritime Arrangements in the Timor Sea, signed in January 2006. This unjust treaty exists because Australia refuses to recognise East Timor’s sovereign rights under the United Nations Convention on the Law of the Sea.
The May 3 Australian quoted resources and energy minister Martin Ferguson as saying: “The Australian government has consistently maintained that the location of LNG processing is a commercial decision for the Sunrise joint venture … As we have always said, we will carry out our obligations and we expect the Timor Leste government to meet its obligations.”
According to the May 7 Sydney Morning Herald, Gusmao sent a private letter to Voelte in which he stated: “[T]here must have been a wrongful interpretation” of the clauses relating to the development of Greater Sunrise.
On May 6, Voelte and a team of Woodside executives travelled to East Timor to seek a meeting with Gusmao. They were met by a vibrant 200-strong rally that prevented them from leaving the airport for two hours. Gusmao refused to meet with them. The East Timorese government also sent a letter to the Australian Stock Exchange, requesting it to instruct Woodside to correct statements the company made about Greater Sunrise in its 2009 annual report and statements made at the company’s annual general meeting on April 30. The letter noted that these statements “clearly give the public and investors the impression that a decision on the development of the Greater Sunrise field is imminent and that it is Woodside and its joint-venture partners that have the final say as to how the development should proceed”. It added that Woodside had failed to acknowledge that the Greater Sunrise fields cannot be developed without East Timor’s consent.
In an interview reported on May 26 on the Bloomberg Businessweek web site, the president of East Timor’s independent National Petroleum Authority (NPA) confirmed that Woodside executives walked out of a meeting with the NPA on May 18 after it was explained to them that more detailed reports were provided on all options for processing the gas and assessed and that an in-principle agreement had been reached by East Timor and Australia. NPA president Gualdino Da Silva told Bloomberg: “Woodside and its partners have not done their homework properly”.