Draft Regulation for Petroleum Operations in the TL Exclusive Area and
Draft Model Onshore and Offshore Production Sharing Contracts
|In early May 2014, the Timor-Leste National Petroleum Authority (ANP) began publicizing a series of meetings to discuss new draft regulations for petroleum activities in Timor-Leste's Exclusive Area (TLEA), the part of the Timor Sea which is not claimed by Australia or Indonesia. The consultations were also to discuss proposed changes to the model Production Sharing Contracts (PSCs) between Timor-Leste and the oil companies for the TLEA and for oil and gas production on Timor-Leste's land. La'o Hamutuk wrote a blog article protesting that the draft documents were not available before the Dili consultation, and the ANP eventually provided them, as well as extending the deadline for written submissions to the end of June.|
The detailed regulations can protect (or endanger) workers, revenues and the environment. These regulations, hundreds of pages long, are critically important in balancing the cost-cutting, profit-seeking incentives of the companies against the human, financial and ecological responsibility of Timor-Leste's government to safeguard against such dangers. When a similar consultation was held in 2008 on Technical Regulations for the Joint Petroleum Development Area (JPDA), La'o Hamutuk identified many areas which needed improvement. Since then, offshore oil disasters like Deepwater Horizon and Montara have been sharp reminders of the need for effective regulation.
In 2011, ANP sought outside help to review the TLEA regulations and review the TLEA model PSC. They contracted Gaffney, Cline & Associates who presented a draft in 2011, which ANP worked on for nearly two years before opening the current public consultation.
|On 30 June 2014, La'o Hamutuk submitted nine pages of comments and analysis on the draft regulations and contracts to ANP. These are some of our most important suggestions:|
The drafts include confusing language, ambiguous clauses, missing definitions, omitted legal references, wrong numbering and many other errors.
The role of the ANP should be made clearer, rather than frequent references to the “Ministry.”
Many provisions on environment, health and safety should be improved, including those discussing management of discarded materials, legal frameworks, minimizing risks, banning flaring, defining “best practice” and “reasonably practical,” health and safety committees and audits, sanctions, and protecting against companies’ negligence or malfeasance.
Timor-Leste’s interests are broader than simply maximizing production of oil and gas, but encompass state revenues, environment, sustainable development, and minimizing risks of injury, damage or corruption.
Before onshore exploration begins, local communities need more consultation and protection.
Transparency is generally ignored and sometimes prohibited by these draft regulations and contracts, and needs more attention, requirement and protection.
Even though local content is unlikely to be a significant element in building Timor-Leste’s non-oil economy, it needs better definition and clearer requirements.
Timor-Leste should receive more money from extracting our oil and gas, and not be so generous to the companies.
Obligatory monetary “contributions” from companies are inappropriate, as they violate budgetary and democratic processes.
All revenues – taxes, royalties, fees, penalties – must be deposited into the Petroleum Fund as required by the Petroleum Fund Law.