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Timor-Leste and the Timor Sea - The Essential Facts

Timor-Leste became the world's newest independent state in May 2002, but one significant aspect of its right to self-determination remains to be exercised - Timor-Leste has no maritime boundaries with its neighbours, Australia and Indonesia. This means that the extent of Timor-Leste's maritime territory is yet to be determined.

An agreement on permanent boundaries, and the consequent ability to derive revenues from the development of offshore petroleum and other resources, is essential for securing Timor-Leste's economic independence. These resources will allow Timor-Leste to avoid long-term aid dependency as it goes about alleviating mass poverty and rebuilding the nation.

Establishing permanent maritime boundaries in the Timor Sea is also the best way to provide the security and stability necessary to make the area an attractive investment environment. For these reasons, establishing permanent maritime boundaries in the Timor Sea is one of the top priorities of the Timor-Leste Government.

The resources at stake

The total value of known oil and gas reserves in the disputed area of the Timor Sea is estimated at more than US$30 billion. Interim arrangements agreed between Australia and Timor-Leste for the development of some of these resources may earn Timor-Leste an estimated US$4-5 billion in coming decades. Once the Timor-Leste Government puts aside sufficient revenue for future generations, this will leave about US$100 per capita per year for recurrent expenditure. However, if Timor-Leste were to have access to the reserves to which it is entitled under international law, it could expect to earn in the order of US$15 billion over the same period. This amount would allow Timor-Leste both to save sufficient revenues for the future, and to have sufficient resources to rebuild the nation and significantly expand essential community services.

The Timor Sea Treaty, signed with Australia on 20 May 2002, has underpinned petroleum development in the 'Joint Petroleum Development Area' (JPDA). These arrangements provide Timor-Leste with about one third of its entitlement at international law. The biggest single known resource in the Timor Sea is the Greater Sunrise field, with about 8 trillion cubic feet of gas and 300 million barrels of condensate (light oil). Under interim arrangements Timor-Leste receives only 18 per cent of the revenue from this field, which could be in the order of US$10 billion. This is despite Timor-Leste having a strong claim at international law to the entire Greater Sunrise field.

There is no revenue sharing arrangement in place between the governments of Timor-Leste and Australia for the Buffalo, Corallina and Laminaria fields. These fields are currently being exploited under Australian Government license. They have delivered around US$2 billion in revenue to the Australian Government since 1999, or around US$1 million per day. Timor-Leste currently receives no revenue from these three fields, even though they are located twice as close to Timor-Leste as to Australia. Because these fields lie in an area of overlapping claims, Australia's unilateral issuance of licenses to petroleum companies is illegal at international law. Timor-Leste has asked the Australian Government to stop such unilateral exploitation of resources.

Overlapping claims

Following independence, the Timor-Leste Parliament passed the Maritime Zones Act, which sets out Timor-Leste's potential entitlement at international law to sovereign maritime zones - a 200 nautical mile radius from the coastline of Timor-Leste. This claim overlaps with the claims of Australia and Indonesia, including in the Timor Sea.

The overlap between Timor-Leste's maritime claim and that of Australia covers a large part of the Timor Sea, including the entire Timor Sea Treaty area and the Greater Sunrise, Buffalo, Laminaria and Corallina fields. According to UNCLOS, the international convention that sets out relevant international law, a maritime boundary between Timor-Leste and Australia should be drawn to achieve an equitable result.

International law would set the frontal boundary dividing the Timor Sea into northern and southern parts as an equidistance line (or halfway line) between Timor-Leste and Australia. The entire Timor Sea Treaty area lies on the Timor-Leste side of the equidistance line.

A boundary drawn according to international law would set lateral boundaries dividing the eastern and western parts of the Timor Sea in such a manner as to give Timor-Leste a significantly wider area than the JPDA. These wider lateral boundaries would give Timor-Leste all of the Greater Sunrise field, and the BCL fields. All of these fields are much closer to Timor-Leste than to Australia.

Rebuilding the nation and avoiding aid dependency

Timor-Leste is one of the poorest nations in the world. UNICEF estimates that 1,200 of every 10,000 children die before their fifth birthday, compared to only 60 in Australia. Life expectancy is only 49 years, compared with 79 in Australia.

Raising the quality of life of the Timor-Leste people requires substantial resources. Aid agencies are now facing great demands in other parts of the world. The Timor-Leste Government wants to avoid long-term dependency on foreign aid. Providing access to the resources of the Timor Sea is the best way to secure the stable and long-term revenue required to raise the quality of life in Timor-Leste and to achieve economic independence. In order to ensure that these resources will also benefit future generations, the Timor-Leste Government plans to save a significant share - about half - of the revenue it receives from Timor Sea resources in a Petroleum Fund.

Negotiation and arbitration

The issues are not so complex as to require protracted talks over more than a few years at most. The Timor-Leste Government is disappointed that the Australian Government is not willing to devote the same sustained effort to this process as it devoted to those regarding the Greater Sunrise field.

An agreement on maritime boundaries is particularly pressing in light of Australia's continued depletion of the Buffalo, Corallina and Laminaria fields, which has cost Timor-Leste about $1 million a day since 1999. Australia has also continued to issue and advertise licenses in other disputed areas.

Timor-Leste's alternative to negotiation - resolution by a neutral third party arbiter - has been limited by Australia. Shortly before Timor-Leste's independence, the Australian Government withdrew its consent to the maritime boundary jurisdiction of relevant international dispute resolution bodies - the International Court of Justice and the mechanisms under UNCLOS.

Regular talks between both countries commenced in April 2004, and after an intensive round of meetings in September and October that year, six monthly meetings are scheduled to take place in 2005. The Government of Timor-Leste would like to meet more regularly in order to resolve this dispute expeditiously.



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