Timor Sea

By way of background, our involvement in this issue originated in December 1997 when we became Timor Sea oil & gas advisor to veteran campaigner for East Timorese independence,  Dr. Andrew McNaughtan R.I.P.  You can see a short video documentary made in January 2003 in which we were both interviewed. The 18-minute video was produced by photographer and freelance journalist H.T. Lee R.I.P.

In June 2011 we were invited to make a public presentation on Timor Sea petroleum issues to an East Timor solidarity group.    We decided to act on that invitation to develop and present new ideas for a “middle way” solution to the impasse between the government of Timor Leste and the operator of the Greater Sunrise gas field, Woodside Energy.

Our agenda was to put into the public domain a modified, pragmatic development concept for the Greater Sunrise gas field.  It aimed to be a “win-win solution” to the conflict, and hopefully picked up by commentators and negotiators.  We investigated ways whereby Timor Leste could achieve her onshore energy development aims without instigating a territorial dispute with Australia.  The concept, if it could be negotiated, would result in natural gas and natural gas liquids from the Greater Sunrise field becoming the primary energy source for Timor-Leste, for the next 50 years or so, creating a transition period for development of renewable energy.

The talk was titled “Fuelling the future of Timor-Leste” as summarised in the above embedded Slideshare document  (It can be downloaded also as PDF on scribd, 13.9 MB).

The concept gains publicity

In August 2011, we were contacted by Damon Evans, the Asia reporter for the highly reputable Petroleum Economist magazine.  Damon asked for permission to use our presentation as input for a a cover story, that was subsequently published in October 2011.  The cover story was named The Great Game of Greater Sunrise (taken from a heading on one of our slides). See “The Middle Way” at the bottom of page 3 here (PDF).

In May 2012, Hamish McDonald,  Asia-Pacific editor of the Sydney Morning Herald and one of Australia’s leading foreign affairs commentators, wrote an opinion piece that gave some more publicity to the “middle way” solution as described above.  See “Cooking up a deal across the Timor Sea” (The Age & Sydney Morning Herald, May 19, 2012)

In October 2012 the Australian ABC Four Corners documentary Taxing Times in Timor went to air.  On the program’s web page, links to both the above-mentioned Petroleum Economist article and our presentation were included in the background information section.  That documentary has been uploaded to youtube (see here).

In March 2013, Hamish McDonald again mentioned the the “middle-way” solution, in his wide-ranging and highly regarded analysis published in The Global Mail online news and features website: It’s Tiny, Poor, And Very Possibly Not Going To Take It Anymore.

Summary of possible future outcomes.

  1. Ultradeepwater pipeline to Timor Leste across the Timor Trough.  This is the government of Timor Leste’s strong vision and policy.  It is aimed at elevating Timor Leste into the elite group of LNG exporting countries, with large-scale onshore gas liquefaction, storage, and ocean tanker loading facilities.  Such a mega-project would create many economic benefits for the country, particularly during the onshore construction phase. During the operational phase, an important upside of the gas pipeline project would be the availability of onshore domestic gas supply.
  2. Offshore processing as preferred by the operator, Woodside Energy and its joint venture partners. This is floating LNG, called FLNG.  Though it is the optimum development option from the operator’s technical and economic perspective, it  fails politically, in that it does not provide any onshore infrastructure benefits nor domestic gas supply for the part-owner of the resource, Timor Leste.
  3. “Middle way” concept as described in our presentation above.  This is based on both FLNG offshore processing AND desired onshore infrastructure benefits for Timor Leste.  It is seen as incorporating the key benefits of both the above mutually exclusive development options.  It is a pragmatic and logical engineering solution to a political problem.    To be implemented, it does not depend on politically risky attempts to secure permanent maritime boundaries in the Timor Sea.   It appears to satisfy the real needs of all parties, namely Timor Leste, the Greater Sunrise joint venture partners, and the Australian government. To be realised, this vision will only result from negotiations between all three parties aimed at developing the gas field for the benefit of all.
  4. No agreement:   In this case, Timor Leste is at liberty to terminate the CMATS treaty after February23,  2013, or six years after the treaty entered into force by the exchange of notes on February 23, 2007.  This derives from the termination clause in the treaty, found in it’s Article 12. In the absense of the CMATS treaty, Timor Leste is at liberty to address in public forums the issue of unresolved maritime boundaries in the Timor Sea.  However, the Sunrise International Unitisation Agreement (based on a lateral demarcation line that gives Timor Leste only 18% of the resource) would still remain in force.  Discussion of maritime boundaries may give  Timor Leste leverage to engage the Australian government in discussions about how the field is to be developed in the best interests of Timor Leste and Australia.  Termination of CMATS by either party, would paradoxically result in non-termination if the field was developed.  There is another sentence in Article 12.  That sentence stipulates the CMATS treaty would magically spring back into force if ever production from Greater Sunrise commenced, regardless of whether the treaty had been terminated after February 23. 2013.

Update

In May 2013, Australia’s foreign minister Bob Carr announced that Timor Leste had called for arbitration regarding the validity of CMATS, on the grounds of Australian “espionage” during the original negotiations.

In February 2014, the political and legal fallout from the spying allegations was investigited in Australia’s Radio National Background Briefing show headlined Did the walls have ears?. This writer was interviewd for the show by reporter Hagar Cohen. This page was a primary link in the show notes. Hagar also interviewed Australia’s former foreign minister Alexander Downer; Peter Galbraith (East Timor’s lead Timor Sea negotiator 2000-02 and later); Paul Cleary (author of Shakedown); Agio Pereira (East Timor’s Secretary of State); Bernard Collaery (Australian lawyer representing East Timor); and Tom Clark (convenor of the Timor Sea Justice Campaign). You can listen to the broadcast and read the transcripts on the Radio National website here.

Overview of current situation.

It is not easy to fathom what real outcome the Timor Leste government is striving to achieve, by questioning the validity of the CMATS treaty.

Even when reading the speculations published by one of Australia’s most learned commentators on the affair, Fr. Frank Brennan SJ, one is still left somewhat baffled.  See excerpts from Fr. Frank’s essay on the current CMATS dispute here.

There are high diplomatic risks in the course adopted by Timor Leste, but are these risks offset by achievable and tangible rewards?

Our guess is that Timor Leste wants to engage the Australian Federal Government in a settlement of the Sunrise development impasse.   An adverse ruling in The Hague, that invalidates the treaty on CMATS,  would be humiliating for Australia.  This shifts the balance of power towards Timor Leste.  Thus, Timor Leste may gain the required leverage for an ‘out of court settlement’ in its favour.    That would be aimed at bringing the Australian government to the negotiating table.    Both governments could align their interests to agree on a mutually beneficial development concept for Greater Sunrise.

The optimum plan for Timor Leste is one that gives them onshore petroleum infrastructure benefits and energy security.   The optimum plan for Australia is one that avoids both a humiliating defeat at The Hague and avoids the emergence of a failed state at our doorstep.

Whether that development concept is a pipeline to Timor Leste or a “middle way” solution for domestic energy infrastructure, the Greater Sunrise joint venture partners would be required to comply with the national interests of Timor Leste and Australia.

Conclusion.

There is no conclusion, yet.