Timor-Leste scraps sea treaty deal with Australia over oil, gas reserves

Timor-Leste has decided to scrap 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 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 south-east of Timor-Leste and 450 kilometers north-west of Darwin, Northern Territory, Australia.

Termination of 2006 treaty

In a statement issued on Monday, it has been revealed that Timor-Leste has notified Australia of its wish to terminate the 2006 treaty.

The two countries, in a joint statement, said they agreed that treaty will cease to have effect three months after the delivery of Timor-Leste’s notification.

Worth noting, they also said that 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 hydrocarbons joint development area (JDA) between Australia and Timor-Leste.

“For the further conduct of the conciliation process, the governments of Timor-Leste and Australia have each confirmed to the other their commitment to negotiate permanent maritime boundaries under the auspices of the Commission as part of the integrated package of measures agreed by both countries,” the joint statement reads.

The governments of Timor-Leste and Australia said on Monday they were looking forward to continuing to engage with the conciliation Commission and to the eventual conclusion of an agreement on maritime boundaries in the Timor Sea.

It is unclear what this now means for the Sunrise Development and the revenue split. Under the 2002 Timor Sea Treaty in force, this means that 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.

According to Woodside, the operator of the Greater Sunrise development, the area holds gross (100%) contingent resources (2C) of 5.13 trillion cubic feet (Tcf) of gas and 225.9 million barrels (MMbbl) of condensate.

Offshore Energy Today staff