http://www.bloomberg.com - 17 June 2005

East Timor Says Australian Gas Royalty Agreement `Very Close'

June 17 (Bloomberg) -- East Timor and Australia are ``very close'' to an accord on the division of royalties from Woodside Petroleum Ltd.'s stalled $3.7 billion Sunrise natural gas project, said Prime Minister Mari Alkatiri.

The accord will be a temporary agreement to share the resources of Sunrise and will not prejudice East Timor's ability to seek a permanent maritime boundary at a later date, Alkatiri said yesterday evening in a public address in Melbourne.

East Timor, or Timor-Leste, broke away from Indonesia in May 2002 after a 24-year armed struggle and has been seeking to set its permanent boundary with Australia at a mid-point between the countries. Agreeing to the deal would mean East Timor setting aside its maritime boundary claim for 50 years, Australian Industry Minister Ian Macfarlane said June 6 in Darwin.

``We are very close to a deal, but still not really there,'' Alkatiri said in response to a question following his address. ``We are negotiating a sharing of resources, it's not a financial settlement. We reject the idea of a financial settlement.

East Timor would receive as much as $5 billion of extra revenue under a proposed agreement with Australia on splitting petroleum royalties from Sunrise, Macfarlane said June 6. In addition, East Timor will receive about $14 billion over the next 20 years from its 90 percent share of royalties from an area jointly administered by the two countries, he said. The actual amounts depend on oil prices, he said.

Woodside, Australia's second-biggest oil and gas producer, and its partners stopped work on the proposed $3.7 billion Sunrise gas project on Dec. 31 in the absence of an agreement between Australia and East Timor on royalties. Royal Dutch/Shell Group, ConocoPhillips and Osaka Gas Co. also have stakes in the Sunrise project.

Angela Macdonald-Smith in Melbourne

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