Thu Jun 2, 2005 07:24 AM ET

East Timor says Woodside "arrogant" over gas field

MELBOURNE, June 2 (Reuters) - East Timor said on Thursday an agreement with Australia over revenues from a major gas field in seas between the two countries could unravel because of a dispute over the location of a gas processing plant.

East Timor's Foreign Minister Jose Ramos-Horta said Australia's Woodside Petroleum Ltd. (WPL.AX: ) , operator of the Greater Sunrise gas field in the Timor Sea, was "arrogant" in its belief that building a processing plant in East Timor was not viable.

"We are not prepared to allow Woodside in a very arrogant fashion to dictate where the pipeline should go," Ramos-Horta told Reuters by telephone from Lisbon.

Ramos-Horta said the dispute could jeopardise a draft agreement between East Timor and Australia reached in April on how to divide billions of dollars in revenue from the field.

"They are creating very serious reservations in East Timor as to whether the Australian side is acting in good faith in terms of the development of Greater Sunrise," he said.

Woodside said a feasibility study conducted last year by the Greater Sunrise consortium found it was not viable to transport the gas to East Timor, for several reasons, including waters that were too deep.

"We are as keen as anyone to get the project going but it has to be commercial," said Rob Millhouse, a spokesman for Woodside.

Woodside froze the project in December last year after talks between East Timor and Australia over revenue sharing and sea borders collapsed.

Millhouse said Woodside preferred to transport the gas to Wickham Point near the northern Australian city of Darwin, where a liquefied natural gas (LNG) plant is already being built for the ConocoPhillips-operated Bayu Undan project.

The Greater Sunrise field contains an estimated 8 trillion cubic feet of gas, which would provide vital revenues for East Timor, a country currently reliant on foreign aid.

Under the draft agreement, Australia has offered East Timor additional revenue from the Greater Sunrise field. In exchange, East Timor would postpone establishing a permanent border in the Timor Sea for 50 years.

Woodside has a 33.4 percent stake in the Greater Sunrise consortium, ConocoPhillips (COP.N: ) has 30 percent, and Royal Dutch/Shell (RD.AS: ) (SHEL.L: ) 26.56 percent. The balance is held by Japan's Osaka Gas Co. Ltd. (9532.T: ) .

Woodside is 34 percent-owned by Shell. ($1=A$1.33)

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