Timor-Leste recently celebrated its second anniversary of independence after 24 long years of struggle for freedom. Following the UN ballot in 1999 and subsequent militia violence we inherited a nation that had been laid to waste. Most vital infrastructure and institutions had been completely destroyed.
The UN transitional administration and our development partners have made great efforts to start the rebuilding process. Since the restoration of independence in 2002 my government has been building national institutions from the ground up. A major focus has been putting in place the capacity to manage our petroleum resources and revenues from them, which will be the basis for our reconstruction and development for decades to come.
In the near and long term, Timor-Leste’s economy will be almost entirely dependent on revenue from petroleum in the Timor Sea. Our resources in the Timor Sea will play a vital role in helping to rebuild our nation and address the many challenges associated with entrenched poverty and under-development. I will therefore take this opportunity to talk about how my government is building a sound economic base and long-term stability in the form of our proposed Petroleum Fund. I will also outline our efforts to put in place transparent and accountable regulations for this vital sector.
Timor-Leste is highly prospective for petroleum in onshore and offshore areas. We have seen a tremendous amount of interest recently from the petroleum industry in developing our onshore and offshore petroleum. Therefore, I will also describe the legal framework that Timor-Leste is establishing to facilitate development of its resources. In particular, I will outline the framework and program that is being put in place for pre-exploration seismic data gathering which we intend to commence within the coming months and to be completed by mid-2005, when the first exploration licenses should be issued.
First, though, I would like to outline our perspective on an issue that you have certainly read about recently in the media: the question of Timor-Leste’s maritime boundaries.
Determining future maritime boundaries between Australia and East Timor
A key element of nation building is the right to delineate the extent of a nation’s resources area so that we can develop and plan for the future.
Upon the restoration of our independence in May 2002, Timor-Leste claimed its international maritime entitlement through our Maritime Zones Act which includes a claim to resources in the Timor Sea including vast petroleum resources.
Neither Timor-Leste nor any of its previous legitimate administrators ever agreed to delimit its maritime boundaries with its neighbors – including Australia. There have never been maritime boundaries applicable to the territory that is now Timor-Leste. I often hear and read about Timor-Leste wanting to change its boundaries with Australia. There are not and there have never been any boundaries to be changed. There are boundaries to be established.
The establishment of maritime boundaries is an integral part of Timor-Leste’s right to self determination. We are very close to finalizing our land border with Indonesia, but we are yet to determine the extent of our maritime resources. We are seeking to put in place the most stable and secure basis for the development of the Timor Sea – a permanent maritime boundary. A permanent maritime boundary will not only be a good outcome for our new nation – it will give investors genuine security and stability.
The issue of security and stability for investors has always been a priority for us. Our agreement to the Timor Sea Treaty was greatly influenced by the need for the investors in the Bayu-Undan project to obtain legal and fiscal certainty to continue with their investments. The Treaty was in the best interest of our people, and it was our recognition of the interests of investors.
In April this year, Timor-Leste and Australian officials met in Dili for the first round of talks on maritime boundaries. Despite our request for monthly meetings, we were only able to get agreement to have the next meeting scheduled for September this year. As someone recently commented, rice and corn crops can be planted and either harvested or fail for our people within that time.
I cannot overstate the importance to Timor-Leste of these talks and of making progress towards reaching agreement on maritime boundaries. To give you a sense of the stakes for our country: under current temporary petroleum development agreements with Australia, Timor-Leste will most likely receive revenues in the order of US $4 billion over the next generation. However, the vast majority of international experts are of the view that a permanent maritime boundary set according to international law would give Timor-Leste significantly greater resources in the Timor Sea – providing revenues potentially in the order of US $12 billion over the same time based on known reserves.
Despite what has been quoted in the media lately, Timor-Leste does not claim these resources because we are poor. Timor-Leste claims these resources because it is our international legal right. Timor-Leste would prefer to support itself from revenues from its petroleum resources, rather than relying on the generosity of international donors. The people of Timor-Leste fought a generation for recognition of our political independence, and we will fight for our economic independence. And as I will outline in a moment, Timor-Leste will soon take a step towards our economic independence. As is our sovereign right, Timor-Leste will initiate the exploitation of our resources with an pre-exploration invitation to the petroleum industry.
We acknowledge the value to the petroleum industry of maritime boundaries. We know that maritime boundaries are the best means to ensure stability for further investments in the Timor Sea.
Sadly, the outlook after the April round of negotiations is quite hopeless in our view. The Australian response with respect to our claim on the lateral boundaries – where the vast wealth of the resources and revenues are – was that the lateral boundaries are non-negotiable beyond the current JPDA limits. These lines have no relevance other than given in the temporary Timor Sea Treaty, which is a temporary treaty, pending the settling of the permanent maritime boundaries between our two countries.
Australia takes this position in spite of the fact that the Treaty specifically states that it shall not prejudice the rights of the two countries relating to seabed delimitation. Further as I said earlier, they are not willing to meet more frequently than every six months on other negotiations. This alone has signaled to many of us the lack of seriousness or commitment to resolving this issue.
Beyond the importance to Timor-Leste of the resources at issue, the unfairness of the Australian position is this: One, Australia is actively depleting the resources in dispute, including the Buffalo, Laminaria and Corallina fields. And two, Australia refuses to have a neutral third party resolve our dispute. This suggests an uncertainty about the strength of Australia’s legal case.
