Timor Sea Oil & GasA 30 minute “background briefing”

on 40 years’ history of the Timor Sea sovereignty wrangle

from 1962 up to the signing of the Timor Sea Treaty 2002

by

Geoff McKee

at

“5 YEARS ON….a celebration of EAST TIMOR’S INDEPENDENCE REFERENDUM”

Leichhardt Town Hall, August 30, 2004

Prepared by Geoffrey McKee • © G A McKee & Associates Pty Ltd • Oil & Gas Project Development Services • Sydney

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Speaker’s background…..

1987 –1996 Timor Sea JV oil company

1997 - now Oil & gas consultant

2004 Guest lecturer, School of Petroleum Engineering, UNSW

INDEPENDENT PERSPECTIVE(not aligned to any political party or oil company)

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1998 – 1999: Timor Gap working group reporting to through ETISC Darwin to JR Horta

2000: Petroleum-related Education & Training for East Timorese (tender preparation)

2001 – 2002: Timor Sea concession dispute (Oceanic Exploration/Petrotimor)

Perspective derived from……

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Photo by H T Lee, October 1999

In memory of Andrew McNaughtan1954 - 2003

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Timor Sea Oil ExplorationWhen did it start? In 1962, Australia commenced issuing exploration permits covering the entire Timor Sea to the edge of the continental shelf

Portugal objected, claiming jurisdiction to the median line

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KupangKupang

DiliDili

12

3

4

1

1

2

23

1962 First oil exploration permits issued by Australia

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KupangKupang

DiliDili

1969 Drilling commences in Australian permits

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“Well informed sources in Jakarta say that Indonesia has already prepared maps showing the boundary of it’s own ‘continental shelf’ as the median line between Australia and Timor”

- Australian Financial Review

October 16, 1970 The continental shelf becomes an issue

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A17

A16

Portuguese Timor Seabed boundaryagreed May 18, 1971

Seabed boundaryagreed October 9, 1972

1972 Australia celebrates “diplomatic coup”

Median line(line of equidistance)

Seabed treaty signed with Indonesia

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Courtesy Woodside Petroleum, Mining conference, Dili, March 2003

1974 Woodside-Burmah-Shell permits

NT/P12NT/P12

NT/P11NT/P11

WA-36-PWA-36-PNT/P8NT/P8

KupangKupang

DiliDili

Sunrise /Sunrise /TroubadourTroubadour 1972 1972 SeabedSeabed Boundary

Boundary

1972 agreed seabed boundary between Indonesia and Australia coincides with northern limit of Woodside’s 1963 exploration permits NT/P8 to the west and NT/12 to the east.

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Map courtesy Oceanic Exploration / Petrotimor, Dili seminar, March 2002

December 1974 Portugal asserts sovereignty

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December 11, 1989 Timor Gap Treaty signed“The Timor Gap Treaty is a pretty shonky piece of work that is a by-product of Indonesia’s illegal invasion of East Timor and Australia’s collusion with Jakarta over this”Andrew McNaughtan, Sydney Morning Herald, April 13, 2000

After 10 years’ negotiation, Indonesia and Australia could

not reach agreement on a maritime boundary in the Timor

Sea, leading to a “Joint Development Zone”.

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First production of oil from BHP’s Elang-Kakatua discovery under the (illegal) Timor Gap Treaty’s permit ZOCA-12.

This was at a time when Australian activists began to sense that independence for East Timor was not a distant dream, but a real possibility due to changing historical circumstances caused by the decline of the Soeharto regime.

July 22, 1998First production of oil from the Gap

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July 22, 1998CNRT media release coincides with first production of oil in the Timor Gap

….designed to shift Australian government perceptions through adoption of a “pragmatic” approach.

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August 20, 1998 Sydney Morning Herald

….Andrew McNaughtan and ETISC arrange a meeting that takes the Australian and Indonesian governments by surprise, further changing perceptions about the “Timor Gap problem”.

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January 13, 1999

Labor Opposition moves the goalposts….

ALP media release quantifies potential revenue to East Timor and calls for ET representation on the Joint Authority and Ministerial Council

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8 September 1999

Dili burning At the the Senate East Timor hearings in Darwin

Andrew McNaughtan and Rob Wesley Smith interviewed by shocked and confused Senators

Jim Godlove of Phillips Petroleum sticks to the main game and undermines East Timor pipeline vision for Bayu-Undan

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April 1, 2000

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April 13, 2000

Headlines in Sydney Morning Herald

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Professor Victor Prescott University of Melbourne

•Generally confirmed Timor Gap Treaty lateral boundaries as lines of equidistance

• notes small error in eastern lateral (2 nautical miles)

• Galbraith advised of Jeffery Smith’s work suggesting wider claims for East Timor

June 14, 2000 Timor Sea conference in Canberra

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September 13, 2000

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November 24, 2000Australia warns East Timor on the lateral boundaries

2nd round of talks , Regent Hotel, Singapore

Australia: Michael Potts DFATJohn Hartwell, DSIRRebecca Irwin, AG’s

UNTAET Peter GalbraithMari AlkatiriJonathan Prentice

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February xx, 2001Senior UNTAET Advisor recommends declaration of EEZ

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Peter Galbraith's powerful keynote address:-

Issue of lateral boundaries publicly raised by East Timor for the first time

The finest expression of an uncompromising “Justice Case”

  “As the product of an illegal occupation,the Timor Gap Treaty is itself illegal”

9 April, 2001 APPEA Conference, Hobart

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April 23, 2001Strident media reaction to Galbraith’s address

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Sydney Morning Herald Americans threaten to derail Timor oil talksBy Jane Counsel

PetroTimor's chief executive, Mr. Charles Haas, said the company planned to lodge a statement of claim in the Australian Federal Court within the next fortnight seeking legal recognition of a 1974 exploration concession grantedover a large part of the Timor Sea.

June 26, 2001 Petrotimor takes a stand

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DiliJuly 5, 2001

Timor Sea Arrangementagreed

…..Pragmatism prevails

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A17

A16

Laminaria-Corallina

Bayu-Undan

Evans Shoal

Greater Sunrise

5 July 2001 Australia / East Timor ‘Joint Petroleum Development Area’

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July 6, 2001 Tax wrangle commences

Tax wrangle commences one day after signing the Timor Sea Arrangement.

Opinion piece in the Sydney Morning Herald byMari Alkatiri and Peter Galbraith

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Offshore fiscal regimes compared…..

State take

UK 31%

New Zealand 47%

Australian PRRT 62%

Timor Gap ZOCA 74%

Iraq 93%

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July 31, 2001

Bayu-Undan Participants Defer Offshore Gas Pipeline Investment Decision

August 10, 2001

Shell floats LNG spoiler

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August 2001. East Timorese “out-maneuvered” by Phillips Petroleum taxation wrangle

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October 10, 2001

UN personnel banned from any contact with Petrotimor or their associates

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December 21, 2001

Phillips Announces Agreement with East Timor on Bayu-Undan Gas Development

“U-turn” by East Timor

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January 4, 2002

Petrotimor/Oceanic Exploration submit proposed seabed delimitation proposal to Mr. Mari Alkatiri and the transitional government

March 13, 2002

Meeting between Galbraith and Vaughan Lowe and representatives of Oceanic/Petrotimor

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March 22, 2002 Lowe-Carleton-Ward opinion released to public in Dili seminar conducted by Oceanic Exploration

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Lowe-Carelton-Ward: Small Indonesian islands have big impact on adjacent coast’s lines of equidistance.

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Oceanic Exploration commission pipeline study.

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Australia asserts seabed sovereignty outside the JPDA

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May 20, 2002

Independence Day

Timor Sea Treaty Signed by Prime Minister’s Howard and Alkatiri