The territory dispute over the Greater Sunrise gas fields in the Timor Sea has created a question mark over Woodside's $5 billion Sunrise joint venture. Alison Birrane reports.
Woodside's plans to develop the Greater Sunrise Gas reserves in the Timor Sea could be one step closer with the continuation of high-level private meetings between the Australian and East Timorese governments.
Earlier this year, Woodside said it would need to push ahead with the $5 billion project if it was to meet and capitalise on market opportunities.
Speaking in Darwin last week, where the negotiations are being held, Foreign Minister Alexander Downer said that negotiations over maritime boundaries with East Timor were continuing and were expected to be finalised by Christmas.
Mr Downer described the talks as positive, and acknowledged East Timorese anger concerning the boundary dispute.
However, Mr Downer refused to reveal the details of the negotiations, which he said would remain confidential.
“We are now in a position to be able to move forward very quickly with these talks and that is as a result of the agreement that Jose Ramos Horta, the East Timorese Foreign Minister, and I reached a few weeks ago on the broad architecture of the agreement.
“I remain confident that we’ll be able to conclude an agreement by the end of year – by Christmas, which is the objective that Jose Ramos Horta and I have set ourselves.
“And we’re certainly at this stage heading very positively in the right direction.
“The atmosphere of the talks has been very good and very constructive.
“Now we are actually down to the detail of the negotiation… we are into the technical side of the negotiations and that’s going very well.
“I think we can make our timetable,” Mr Downer said.
In July this year, Woodside Petroleum warned that it could be forced to defer its Sunrise gas project if issues surrounding Timor Sea production rights are not resolved by the end of this year.
Delaying the project would potentially cost WA’s largest oil and gas company billions of dollars in revenue as it would be unable to capitalise on a window in the gas market.
Project delays would also impact on Woodside’s long-term profit and revenue projections which include a large amount of condensate and five million tonnes of liquefied natural gas a year.
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 2009-2010.
A spokesman for Woodside said the Sunrise joint-venture partners aim to complete their development of the project within their tight schedule.
“In order for us to do that, we need the Government to clarify the legal, fiscal and regulatory framework and we need to succeed in securing a foundation customer,” the spokesman said.
The spokesman said that the company was currently assessing development options for the Greater Sunrise project and had begun seeking potential customers.
Located 400 kilometres north-west of Darwin and 150 kilometres from East Timor, the Greater Sunrise fields contain 8.4 trillion cubic feet of gas and 300 millions barrels of condensate.
The Greater Sunrise fields are forecast to generate up to $12 billion in royalties, with East Timor to receive 18 per cent of the revenue.
An interim revenue sharing agreement between Australia and East Timor was signed in 2003 that would allow East Timor 90 per cent of all government royalities within the zone.
This also includes royalties from the $US4 billion Bayu-Undan project operated by US group ConocoPhillips.
However, a dispute over maritime boundaries and royalties erupted in March this year causing political friction between the East Timorese and Australian governments.
The three major oil and gas fields in the Timor Sea, including Sunrise, Bayu Undan and Laminaria are closer to East Timor than they are to Australia.
However, the Greater Sunrise field falls 80 per cent within Australian territory.
But East Timor wants the boundaries shifted so that the field falls within East Timor’s territory.
East Timor claims that it is missing out on billions of dollars in revenue from projects that fall within its maritime boundaries.
That revenue is crucial for the impoverished nation, which secured its independence from Indonesia in 2002.
Further, East Timorese Prime Minister Mari Alkatiri accused Australia of bullying East Timor into signing the interim agreement.
The Australian government has denied placing undue pressure on East Timor.
Meanwhile, thanks to a soaring oil price, Woodside this week announced a $79 million increase in its half year net profit after tax from $272.2 in 2003 to record $724.6 million.
This profit also includes the $373.6 million earned from the sale of 40 per cent of its Enfield oil project.
The company’s NWS expansion project is also nearing completion.
