The Timor Sea Treaty provides for the continuation, with certain agreed modifications, of contracts held by companies under the interim arrangements in place during Timor-Leste’s transition to independence. Those contracts relate to the Bayu-Undan field and Greater Sunrise field. Bayu-Undan is operated by ConocoPhillips (formerly Phillips Petroleum).
Bayu-Undan is the most significant petroleum deposit in the Timor Sea Treaty area, known as the Joint Petroleum Development Area or ‘JPDA’. A map of the JPDA is attached to this Fact Sheet. The Bayu-Undan field may contain reserves of 400 million barrels of condensate and liquid petroleum gas (LPG) and 3.4 trillion cubic feet (TCF) of gas – although proven reserves are at present somewhat lower.
The first significant petroleum development in the JPDA to go forward is the gas recycle phase of the Bayu-Undan field. The development drilling program for 16 wells in the Bayu-Undan field began on 17 May 2002 and two major operating platforms are under construction. In 2004, this project is expected to begin producing and processing the gas, separating and selling the liquids, and re-injecting the gas back into the reservoir.
The second significant development will be the gas phase of the Bayu-Undan field. In December 2001, Timor-Leste and ConocoPhillips reached an agreement on a fiscal package which will allow the Bayu-Undan gas development in the Timor Sea to proceed and which will maximise revenues to Timor-Leste. This agreement is known as the Bayu-Undan Understandings.
The gas development of Bayu-Undan involves the construction of a pipeline from the field to Darwin, Australia.
Australia and Timor-Leste must ratify the Timor Sea Treaty, and Australia must approve the implementation of the Bayu-Undan Understandings between Timor-Leste and ConocoPhillips before the Bayu-Undan gas development can proceed.
On 15 March 2002, Phillips Petroleum announced that it had signed an agreement with The Tokyo Electric Power Company and Tokyo Gas Co. Ltd. to sell three million tons per year (over 17 years) of liquefied natural gas sourced from the Bayu-Undan field. Gas deliveries are expected to begin in late 2005.
In August and October 2002, Timor-Leste and ConocoPhillips met to discuss implementation of the Bayu-Undan Understandings. These negotiations are proceeding well.
The estimated benefit to Timor-Leste from the full Bayu-Undan development (in the proven reserve case) is around US $3 billion over the life of the field, likely to be 17 years. The current annual expenditure budget of Timor-Leste is US $77.7 million.