Timor-Leste drops maritime border arbitration against Australia

Timor-Leste and Australia have moved a step forward in resolving their long-standing maritime border dispute, that would, once resolved, pave the way for the development of the giant Sunrise gas and condensate field in the Timor Sea.

In a joint statement on Tuesday, the two nations and the conciliation commission said they’d held series a series of confidential meetings from 16 to 20 January 2017 as part of the ongoing dialogue in the context of the conciliation between the two countries being conducted pursuant to the UN Convention on the Law of the Sea and under the auspices of the Permanent Court of Arbitration.

According to the statement, these meetings will continue over the course of the year in an effort to resolve the differences between the two States over maritime boundaries in the Timor Sea.

Following the meetings, which were described as “productive“ Timor-Leste wrote to the tribunals in the two arbitrations it had initiated with Australia under the Timor Sea Treaty in order to withdraw its claims.

These arbitrations had previously been suspended by agreement of the two governments following the Commission’s meeting with the Parties in October 2016. The withdrawal of these arbitrations was the last step in the integrated package of confidence-building measures agreed during the Commission’s meetings with the Parties in October 2016, the joint statement reads.

To remind, earlier this month, Timor-Leste decided to exit a 2006 deal with Australia that splits the future revenue from the now-frozen development of the giant gas and condensate field in the Timor Sea.

The two countries had signed the Certain Maritime Arrangements in the Timor Sea (the CMATS Treaty) in 2006, agreeing that revenue from the undeveloped $40-50 billion Greater Sunrise field would be shared evenly between the countries once the field started production.

The deal also stipulated that the maritime boundaries dispute, that has been in place for decades between the two countries some 400 miles apart, would not be tackled for another fifty years.

When it comes to the maritime boundary stances of the two nations, Australia has claimed its maritime boundary goes as far as its continental shelf goes, which well surpasses the imaginary equidistant line splitting the sea between the two countries.

Timor-Leste, however, has been looking to resolve the issue, and get the permanent maritime border at a median line between the opposing countries.

However, it has been said that the median line and the lateral maritime border extension the way Timor Leste wants it to happen would then place the whole Greater Sunrise area into the Timorese waters and jurisdiction.

The Sunrise and Troubadour gas and condensate fields, collectively known as the Greater Sunrise fields, are located approximately 150 kilometers southeast of Timor-Leste and 450 kilometers northwest of Darwin, Northern Territory, Australia.

Termination of 2006 treaty

In a statement issued on January 9, it was revealed that Timor-Leste had notified Australia of its wish to terminate the 2006 treaty.  A day later, on January 2017, Timor-Leste formally notified Australia of the termination of the Treaty, which shall cease to be in force on April 10, 2017, in accordance with its terms.

Worth noting, the parties agreed the Timor Sea Treaty, signed in 2002, would remain in force in its original form, that is, prior to its amendment by the 2006 Treaty on Certain Maritime Arrangements in the Timor Sea. The 2002 Timor Sea Treaty established an offshore hydrocarbon joint development area (JDA) between Australia and Timor-Leste.

It remains to be seen what this now means for the Sunrise Development and the revenue split. Under the 2002 Timor Sea Treaty in force, Timor-Leste gets 90 percent of the production revenue from the fields located in the joint development area between the two countries.

However, it would also get only 18.1% percent revenue from the Greater Sunrise field. The reason is that the Greater Sunrise is only partially (20.1%) located in the Joint Development Area, with Australia taking 79.9 percent, plus its 10% share from JDA.

This now means that, as things currently stand, Timor gets less than it had with the 2006 treaty in place. However, the country most likely hopes this will change pending to a successful outcome of the maritime boundaries discussions with Australia.

Sunrise

The Sunrise and Troubadour gas and condensate fields, collectively known as the Greater Sunrise fields, are located approximately 150 kilometers southeast of Timor-Leste and 450 kilometers northwest of Darwin, Northern Territory.

The fields were discovered in 1974 and hold gross (100%) contingent resources (2C) of 5.13 Tcf of gas and 225.9 million barrels of condensate-

In 2013, the Timor-Leste Government referred a dispute with the Australian Government, relating to the Treaty on Certain Maritime Arrangements in the Timor Sea (CMATS), to international arbitration in accordance with the dispute resolution procedure in the Timor Sea Treaty.

Woodside, the operator of the project, has said it remains committed to developing the Greater Sunrise fields and considers it vital that both the Timor-Leste and Australian governments agree the legal, regulatory and fiscal regime applicable to the resource.