Boundary negotiations are set to resume Canberra on 7 March.
Australia and Timor-Leste have been in talks for the past 11 months over where to draw the boundary in the joint petroleum development area (JPDA). The previous round of talks broke down last September over what Australian officials call East Timor's ambit claims.
Officials from Australia’s Department of Foreign Affairs and Trade (DFAT) are now saying a permanent boundary in the Timor Sea should be deferred until after all oil and gas resources have been exploited, which would put off any decision for up to 100 years.
Canberra is offering Dili revenue beyond the established royalty formula to defer the boundary issue so that petroleum projects can proceed.
Timor wants the permanent boundary between the two countries, which would place most Timor Sea's resources within the JPDA.
But Australia maintains this is an ambit claim and the boundary should be at the edge of the continental shelf, much closer to Timor.
Under an interim deal signed in May 2002, East Timor is entitled to 90% of royalties from oil and gas developments in the JPDA, earning it an estimated $US8 billion ($A10.19 billion) from the Bayu-Undan field.
But the vast bulk of the Greater Sunrise field is currently located in Australian jurisdiction with only a small area lying within the JPDA and the Sunrise agreement gives Australia 79.9% of royalties.
Greater Sunrise is the largest petroleum discovery so far in the Timor Sea. The field may contain as much as 300 million barrels of condensate and LPG and 7.8 trillion cubic feet of gas, which would be converted into LNG, according to the Timor-Leste government’s Timor Sea Office.
Sunrise's reserves are believed to be worth between US$22 and 25 billion.
As the boundaries stand, Timor-Leste would get $4.4 billion of revenue from the development of known Timor Sea oil and gas reserves, but a mid-point boundary would give it about $12 billion, according the Timor Sea Office said.
The interim agreement signed in May also included support for the huge new Sunrise development, but the Timor-Leste parliament has yet to follow the Australian parliament’s lead in ratifying that part of the deal.
With Sunrise’s future uncertain, the operator, Woodside, has suspended work after spending $200 million on exploration and project development until the two governments agree on a legal and fiscal framework.
AAP reports a DFAT official as saying that Australia's ‘creative solution’ involved four issues – setting aside permanent boundary talks, creating legal certainty for the Greater Sunrise project, putting no onerous conditions on the Sunrise project, and ensuring no adverse impact on either country's legal claims in the area.
The Greater Sunrise partnership consists of Woodside Energy (operator), Royal Dutch/Shell, ConocoPhillips, and Osaka Gas.
