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Australian government greed and unfairness over Timor Gap oil gives Timorese just cause for complaint

By James Ensor - posted Friday, 24 January 2003

The sweltering tropical sun over the waters north of Darwin is not the only source of heat separating Australia from East Timor this summer. Under the waters of the Timor Sea, between Australia and the world's newest nation, lie vast reserves of oil and natural gas over which political tensions between Canberra and Dili are rapidly heating up.

Central to the tensions is ratification of the Timor Sea Treaty between Australia and East Timor. The Treaty aims to provide a legal and financial framework for sharing the tens of billions of dollars worth of oil and gas from an area of the Timor Sea that is currently subject to overlapping maritime boundary claims by the two countries. Despite being ratified by East Timor, the Treaty remains in limbo awaiting Australian Government ratification. This follows a reportedly tense December meeting between East Timorese Prime Minister Alkitiri and Australian Foreign Minister Downer.

One of the poorest countries in the world, East Timor desperately needs revenues from the Timor Sea oil and gas reserves to meet its development challenges. Only 40 per cent of Timorese people can read and write. Life expectancy is just 48 years and more than one in 10 East Timorese children born today will likely die before the age of five. To confront these challenges, East Timor's paltry annual budget of $150 million is heavily reliant on foreign aid money - most of which is set to rapidly decline by 2004/05.


However, against this backdrop is growing resentment in East Timor towards what is widely perceived as Australia's lack of good faith in the treaty negotiations over sharing of the oil and gas reserves.

At first glance there seems little ground for complaint. Indeed, the terms of the proposed Treaty appear generous to East Timor, which will receive 90 per cent of oil and gas revenue from what is referred to as the Joint Petroleum Development Area (JPDA). Most of this revenue - worth up to $3 billion - will come from the relatively small Bayu Undan gas field.

However, many East Timorese see Australia's generosity as limited to only one slice of a greater Timor Sea cake to which East Timor is entitled to lay claim. Because most of the much larger and more lucrative Greater Sunrise Field (estimated to be worth up to $30 billion) lies outside the current JPDA, East Timor is only entitled to 18 per cent of this revenue under the current arrangements. In addition, East Timor will receive nothing at all from the Corallina/Laminaria field, currently providing $600 million in revenues to the Australian Government.

It is here that the East Timorese appear to have legitimate grievances. Under international maritime law, East Timor could successfully lay claim to a far greater proportion of the oil and gas reserves of the Timor Sea. This would be achieved by the establishment of a maritime boundary along a median line between the Australian and East Timorese coasts, through the provisions of the United Nations Convention on the Law of the Sea (UNCLOS) as judged by an independent umpire, the International Court of Justice (ICJ).

But here's the rub. During 2002, the Australian Government ruled out this option for East Timor by withdrawing from the compulsory maritime boundary arbitration mechanisms of UNCLOS and the ICJ. This effectively prevents East Timor from seeking independent resolution under international law of the disputed maritime boundary between the two countries and ensures Australia can continue to negotiate the terms of the Treaty from a position of greater power.

Meanwhile, the financial pressure on East Timor to conduct negotiations under these terms continues to mount. Until Australia ratifies the treaty, a substantial proportion of East Timor's share of oil and gas revenue is locked away in a trust account.


Ratification of the Timor Sea Treaty is clearly in the national interests of both Australia and East Timor - but not at the expense of free and fair negotiations. The Australian government should commit to achieving a permanent, agreed maritime boundary between the two countries. A timeframe of no more than five years should be agreed in which boundaries will be settled, or otherwise referred to the independent umpire for arbitration - the International Court of Justice. Australia should also reinstate its adherence to the dispute settlement mechanisms of the International Court of Justice as an initial demonstration of its commitment to resolve the maritime boundary issue.

The unfolding tensions over the Timor Sea Treaty stand to undermine Australia's relations with our close neighbour and tarnish the Howard Government's strongest foreign policy achievement - that is, supporting the fledgling country over the past six years. If they are to have any chance at development, the people of East Timor deserve a fair go.

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About the Author

James Ensor is Director of Public Policy at Oxfam Australia.

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