The idea has been formed with ideas of corporate governance and fiscal accountability in mind after a number of resource rich developing nations have struggled to benefit from their new found wealth.
Securing the funds gained from the resource sector is one of the primary aims of the tiny country whose Prime Minister Mari Alkatiri, is attending a U.K. government-led conference aimed at encouraging greater financial transparency from governments and companies involved in extractive industries.
The petroleum fund is a concept the East Timorese have borrowed from Norway, which developed a similar fund to manage its oil and cash flows from the North Sea. But East Timor plans to modify the Norwegian scheme to build in additional safeguards.
East Timor is expected to reap about US$3 billion ($4.5 billion) in tax revenue from the Bayu-Undan gas project alone, which is being developed by ConocoPhillips.
The Bayu-Undan field is in the Joint Petroleum Development Area, administered by both Australia and East Timor. East Timor will earn 90% of all tax revenue from the project, and Australia 10%.
At the same time East Timor is pushing its claims to have the seabed boundary between Australia and East Timor to the middle point, giving the country control of virtually all the Bayu-Undan and Sunrise gas fields.
Natural gas reserves in the Timor Sea offer a potentially massive revenue stream for a country the size of East Timor.
A US$1.5 billion liquefied natural gas project ConocoPhillips, which will pipe gas from the Bayu-Undan gas field to an LNG facility in Darwin, Australia, will provide revenues averaging about US$100 million a year for East Timor over the next 17 years.
These funds would more than cover East Timor government's current budget, which stands at about US$60m.
Early plans for the petroleum fund are aiming for joint management by the government, parliament and by an independent body. However, any decisions governing the type of petroleum fund to be created will be put off until mid 2004.
A survey is being carried out to determine potential onshore oil and gas reserves in an attempt to promote foreign investment in petroleum and mining code will be completed by the end of the year.
