FA005 - 12 January 2006
Today in Sydney, East Timor's Minister for Foreign Affairs and Cooperation, Dr Jose Ramos-Horta, and I signed the Treaty on Certain Maritime Arrangements in the Timor Sea, in the presence of Prime Ministers Howard and Alkatiri.
The conclusion of the Treaty comes after extensive negotiations were held between April 2004 to November 2005.
The Treaty is based on East Timor's proposal for a 'creative solution' and, together with the 2003 International Unitisation Agreement, establishes a framework for the exploitation of the Greater Sunrise gas and oil reservoir. It will see the equal sharing of upstream Government revenues flowing from the project.
The Treaty builds on the 2002 Timor Sea Treaty in underpinning the income and development of one of Australia's closest neighbours. It also puts on hold the Parties' claims to jurisdiction and maritime boundaries in the Timor Sea for 50 years.
As part of the creative solution reflected in this Treaty, Australia has agreed to share equally with East Timor the upstream revenues from the Greater Sunrise reservoirs. Once the Greater Sunrise project proceeds, it could result in transfers of additional revenue to East Timor of as much as US$4 billion over the life of the project. This would increase East Timor's share of the resource to around US$10 billion.
Exploitation of the Greater Sunrise reservoirs, and the additional revenue provided for under this Treaty, will assist in securing East Timor's development and economic prosperity.
The new maritime arrangements agreed with East Timor under this Treaty are on top of the already very generous sharing arrangements within the Joint Petroleum Development Area, where East Timor receives 90% of revenue from production of petroleum resources, which may be worth as much as US$15 billion.
Under the Treaty, Australia will continue to exercise continental shelf jurisdiction outside the Joint Petroleum Development Area and south of the 1972 Australia-Indonesia seabed boundary. A Maritime Commission will also be established to enable high-level dialogue on a range of important issues facing Australia and East Timor in the Timor Sea, including the management of security threats to offshore platforms and cooperation in managing fisheries resources.
I will place this Treaty and its associated side letters before Parliament in due course, in conformity with Australia's treaties process. It is intended by the Parties that this Treaty be brought into force along with the 2003 International Unitisation Agreement.
The attached fact sheet and map outlines the maritime arrangements agreed with East Timor.
Media Inquiries: Mr Downer's office 02 6277 7500 - Departmental Media Liaison 02 6261 1555
Based on East Timor's proposal for a 'creative solution' Australia and East Timor have concluded the terms of the Treaty on Certain Maritime Arrangements in the Timor Sea (CMATS Treaty).
The Treaty, together with the 2003 International Unitisation Agreement for Greater Sunrise (IUA), establishes a framework for the exploitation of the Greater Sunrise gas and oil resources and will see the equal sharing of upstream Government revenues flowing from the project. The Treaty represents an opportunity to further underpin the income and development of one of Australia's closest neighbours, while at the same time putting on hold the Parties' claims to jurisdiction and maritime boundaries in the Timor Sea for fifty years.
The 2002 Timor Sea Treaty is an interim agreement that is without prejudice to the position of either country on their maritime boundary claims. The Timor Sea Treaty provisionally gives East Timor 90 per cent of petroleum production from within the Joint Petroleum Development Area (JPDA). This is very generous when compared with the 50:50 split that applied in exactly the same area under the former Timor Gap Treaty with Indonesia, especially given Australia's long-standing and valid claim to the entire natural prolongation of the Australian continent, in which all the relevant deposits lie. Development of the oil and gas resources, including the major Bayu-Undan field, is proceeding. Revenues have already started flowing, and it is estimated that East Timor could earn as much as US$15 billion in revenues from the Bayu-Undan project alone.
The IUA, signed by Australia and East Timor on 6 March 2003, provides the secure legal and fiscal environment required for the development of the Greater Sunrise gas reservoirs. Under the Timor Sea Treaty, which is in force for both Australia and East Timor, Greater Sunrise is apportioned on the basis that 20.1 per cent falls within the JPDA and the remaining 79.9 per cent falls in an area to the east of the JPDA over which Australia exercises exclusive seabed jurisdiction. This apportionment reflects the geographical location of the resources. The IUA unitises the reservoirs on the same basis. Legislation to implement the IUA passed through the Australian Parliament in March 2004. Due to the agreed revenue split in the JPDA, under the IUA East Timor would receive 18.1 per cent of the Greater Sunrise revenue and Australia would receive 81.9 per cent.
The CMATS Treaty, signed on 12 January 2006 in Sydney, is a further interim agreement that is without prejudice to the position of either country on their maritime boundary claims. The Treaty reflects the agreed creative solution between East Timor and Australia. The principal aim of the creative solution is to allow the exploitation of the Greater Sunrise gas reservoirs to proceed while suspending maritime boundary claims for a significant period and maintaining the current treaty arrangements in place. The JPDA is not affected by this Treaty and the IUA will be brought into force concurrently with the CMATS Treaty.
As part of the solution found through the CMATS Treaty, although the formal apportionment of Greater Sunrise under the IUA remains the same, Australia has agreed to share equally (50:50) the upstream revenues from the resource. Once the Greater Sunrise project proceeds, it could result in transfers of revenue to East Timor of as much as US$4 billion over the life of the project, increasing its share of the resource to around US$10 billion. The exact benefit to East Timor and Australia will depend on the economics of the project. Exploitation of the Greater Sunrise reservoirs, and the additional revenue provided under this Treaty, will assist in securing East Timor's development and economic stability. The revenue would be paid to East Timor's Petroleum Fund, the balance of which is already around $330 million derived from the 90% share of production East Timor receives from the JPDA.
Both Australia and East Timor will be bound by the Treaty to refrain from asserting or pursuing their claims to rights, jurisdiction or maritime boundaries, in relation to the other, for 50 years. The two countries undertake to not commence any dispute settlement proceedings against the other that would raise the delimitation of maritime boundaries in the Timor Sea. Consistent with the CMATS Treaty and associated side-letters, Australia will be able to continue regulating and authorising petroleum activities outside of the JPDA and south of the 1972 Australia-Indonesia seabed boundary.
Other initiatives established by the CMATS Treaty include: an independent assessment process at the request of either Party to review the reconciliation of the revenue sharing; East Timor being able to exercise water-column (fisheries) jurisdiction within the JPDA; and the establishment of a Maritime Commission to constitute a focal point for bilateral consultations on maritime matters of interest to the Parties, including on maritime security, the protection of the marine environment and management of natural resources.
The CMATS Treaty will be subject to the usual Parliamentary scrutiny processes in Australia before entry into force.
Australia's role in East Timor's transition to independence was crucial, including bringing together and leading the international coalition, INTERFET, that ended the violence and restored security in late 1999. Australia has been a lead contributor of civilian advisers and military and police personnel to successive United Nations missions in East Timor. Since 1999 we have provided over $400 million worth of overseas development assistance. East Timor will remain one of Australia's largest development cooperation partners, and we are committed to providing around A$40 million in development assistance to East Timor over the next three years.