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Plugging the gap

Photo from Wikipedia.
19 February 2013
The Timor Sea is rich with oil and gas. Photo from Wikipedia.


Sharing oil and gas found in the Timor Sea could be a sticky issue for Australia and Timor-Leste, writes EVAN HYND. 

The looming date of 23 February marks an important point in time for the future of Timor-Leste and Australia, with each country’s potential petroleum revenues from the Greater Sunrise oil and gas field in the Timor Sea under the pump.

This Saturday marks the first opportunity available to either country to terminate the Certain Maritime Arrangements in the Timor Sea (CMATS), which covers how the revenues from the Greater Sunrise field would be carved up between the two nations. At the heart of the issue lie the convoluted details of CMATS and the potential consequences of it being terminated once we reach the date of 23 February. But first, a little background.

In 1972, Australia and Indonesia signed a treaty ‘Establishing Certain Maritime Boundaries’ that excluded Portugal, the then colonial administrator of Portuguese Timor. In doing so, they effectively created what is now known as the ‘Timor Gap’ because this treaty was unable to set the maritime boundary between Portuguese Timor and Australia. The Greater Sunrise field was subsequently discovered in 1974 in the Timor Gap. Contracts signed between Australia, Indonesia and various companies to exploit the resources in the Timor Gap were voided once Timor-Leste became an independent country in May 2002.

According to the United Nations Convention on the Law of the Sea (UNCLOS), in an instance where the Exclusive Economic Zones (a 200 nautical mile zone that nominally sets the maritime boundary of a country) of two countries overlaps, a new maritime boundary should be established along the ‘Median Line’, effectively the halfway line between the coastline of Australia and Timor-Leste. If this principle was adhered to, the entirety of the Greater Sunrise field would be situated in Timor-Leste’s maritime boundary. Australia became a party to UNCLOS in 1994, but pulled out in March, 2002, two months before Timor-Leste gained independence. Timor-Leste joined UNCLOS in 2013. As it currently stands however, the maritime boundary has yet to be determined and Timor-Leste is unable to assert sovereignty over this area of the Timor-Sea.

Future flow
CMATS was ratified between Australia and Timor-Leste in 2007 to cover the 80 per cent of the Greater Sunrise field which falls outside of the Joint Petroleum Development Area (JPDA), which is covered under the 2002 Timor Sea Treaty. Under the Timor Sea Treaty, Timor-Leste takes a 90 per cent  share of the revenue stream that flows from all resource extraction in the JPDA.

CMATS divides the revenue derived from resource extraction in the Greater Sunrise field equally between Timor-Leste and Australia. It prohibits both countries discussing maritime boundaries or raising the matter in any other forum or through any other mechanism for 50 years. If no development plan is agreed to within six years, which will be 23 February 2013, either country could give notice that they will terminate the treaty, and this would take effect three months from when notice is given.

There are some key issues that the government of Timor-Leste will need to bear in mind when they consider the future of CMATS.

Firstly, terminating CMATS does not terminate contracts previously agreed to by Woodside Petroleum, Australia’s largest oil and gas operator, and its partners in 2003 for other resource extraction projects. If the Greater Sunrise project is subsequently resumed, CMATS could be implemented again.

In this case, Timor-Leste may have an opportunity to negotiate permanent maritime boundaries with Australia in the Timor Sea. In doing so, Timor-Leste would hope to gain full sovereignty over all of the resources within an exclusive economic zone according to the Median Line.

Secondly, settling the maritime boundary along the Median Line would have massive financial implications for both Timor-Leste and Australia. For Timor-Leste, the extra revenue would be a massive financial shot in the arm in its development strategy. It is, however, hard to see Australia changing its position and approach, which has up till now been dictated by what it would see as looking after its national (economic) interests. For Australia to settle the boundary at the Median Line (to act in ‘good faith’ and adhere to international norms and conventions), it would have to forsake large amounts of revenue.

Finally, terminating CMATS does entail risks for Timor-Leste. It may place strains on the bilateral relationship, which is at this moment reasonably cordial. If a new maritime boundary is not resolved with Australia, and new negotiations take place over the Greater Sunrise field, Timor-Leste may end up with a less beneficial share of the revenue.

Evan Hynd is a PhD candidate at the School of International, Political and Strategic Studies in the ANU College of Asia and the Pacific.

 

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