Woodside, Government tackling Timor

WOODSIDE Energy Ltd and the Department of Foreign Affairs are in discussions to win approval from the East Timorese Government for the development of large natural gas reserves in the Timor Sea.

Senior Woodside executives and Federal Foreign Affairs minister Alexander Downer met in Perth last week to discuss a number of Woodside’s overseas projects, including the controversial Greater Sunrise gas fields in the Timor Sea.

Mr Downer’s presence at Woodside’s new St Georges Terrace premises came amid heightened market speculation that the company was set to give the green light to at least one major project other than its recently announced plan to proceed with the $1.48 billion Enfield oil development.

Market conjecture has wavered between the possibilities of a fifth train for the North West Shelf to a new major offshore development in the US.

The East Timor Government has not ratified the International Unitisation Agreement that would provide the legal and fiscal framework to exploit the Greater Sunrise gas fields.

The Sunrise Gas Project Joint Venture participants include Woodside (operator) 33.44 per cent, Phillips Petroleum 30 per cent, Shell 26.56 per cent and Osaka Gas 10 per cent. The first gas is expected in 2009-10.

The Perth discussions came as a precursor to East Timor hitting out against Canberra’s interpretations of the IUA last weekend.

East Timor’s Prime Minister Mari Alkatiri was reported as saying Australia’s claims were contradictory and would undermine the agreement.

Speaking with WA Business News before the East Timorese criticisms, Mr Downer said Woodside and the Federal Government were working together in regards to the Greater Sunrise gas fields.

“It has not yet been ratified by the East Timorese so we want to try and encourage that to happen and we are looking at how we can do that,” Mr Downer said.

He also said he hoped legislation, which had passed through the lower house of Federal Parliament, would pass through the Senate in “the next week or so”. This would ratify the IUA in Australia.

However, the Federal Opposition, concerned about the IUA legislation, sent it to a parliamentary committee for review. The committee hearings begin this week.

The Greater Sunrise gas field lies 150 kilometres from East Timor and is estimated to contain 8.4 trillion cubic feet of gas of which East Timor will receive 18 per cent of the revenue. Disputes concerning maritime boundaries and royalties have caused political friction between the East Timorese and Australian governments and hampered development.

Australia claims the Greater Sunrise gas field falls 80 per cent within its territory, however, East Timor claims that it is missing out on billions of dollars in revenue from projects that fall within its maritime boundaries.

Mr Downer has also received criticism from East Timor supporters who said East Timor was pressured into signing the IUA after the Australian Government stalled the signing of the Timor Sea Treaty – considered crucial to the development of the Joint Petroleum Development area that includes the Bayu Undan LNG project.

The Australian Government has denied placing undue pressure on East Timor during negotiations.

It has been predicted that East Timor would earn $5.5 billion (90 per cent) of the royalties over the next 30 years – providing economic security to the fledgling nation.

The US has recently been critical of Australia for the slow process of negotiating revenue sharing agreements with East Timor as well as a new maritime boundary.

However, a Woodside spokesman said the company was moving ahead with project preliminaries and had not expected that the IUA would be ratified at this point.

“The IUA provides the key legal and fiscal framework under which the Sunrise participants can continue to invest in progressing the Sunrise gas project. We would hope this IUA would enter into force by the end of this year,” he said.

The spokesman said the company was currently assessing three development options for the Greater Sunrise project and had begun marketing gas to potential customers.

“We are currently marketing Sunrise LNG to gas customers in North Asia and the North American West Coast,” he said.

Woodside’s share price has increased from $11.16 in March 2003 to $15.79 earlier this week, representing a 29.3 per cent rise over the past 12 months.