Greater Sunrise Looking Brighter for Timor-Leste

8 November 2017 Jarryd de Haan, Research Analyst, Indian Ocean Research Programme

Background

Timor-Leste began stalled negotiations this week with Australian petroleum exploration and production company, Woodside Petroleum Limited, along with other Greater Sunrise stakeholders. The negotiations reportedly began on 6 November and involve a number of other companies on the development of the Greater Sunrise oil and gas field. The developments follow a breakthrough in September in the negotiations between Timor-Leste and Australia over their maritime boundary. Speaking in Perth at the Asia-Pacific Regional Conference on 3 November, Timor-Leste Prime Minister Mari Alkatiri noted the following:

‘The Greater Sunrise field can soon be developed now that Timor-Leste and Australia have agreed to a special regime for the joint development and management of the field… In the coming months, we will see further negotiations with the operators on the best commercial option and following that, the signing of the agreement by our two governments’.

Comment

During those negotiations that produced the September breakthrough, both countries reached an agreement on the maritime boundary.  That agreement was then drafted into a treaty following further meetings in October which also addressed many aspects of Greater Sunrise including its legal status, the establishment of a “special regime”, its development process and how the revenue will be split. While no details have been released, there is reason to be optimistic that the outcome of the treaty will be to provide essential funds needed to steer the Timor-Leste economy away from bankruptcy.

While the maritime boundary issue looks to have been resolved, there are still some obstacles to the development of Greater Sunrise. A current sticking point is the preference of Timor-Leste for the extracted gas to be piped to Beaço on the country’s southern coast and processed there, as opposed to Woodside’s preference for a floating LNG processing facility. There has been some recent confusion over that point, with a report by The Australian suggesting a change of heart on the part of the Timor-Leste negotiators. The report quoted returning Prime Minister Alkatiri as saying that ‘everything is on the table’. The Prime Minister’s office quickly responded through a press release posted on Facebook (in Tetum) emphasising the continuing role as lead negotiator of former Prime Minister Xanana Gusmão and adding that ‘we firmly maintain our position that the gas pipeline must come to Timor-Leste’. Given that the statement came after the meeting between Timor-Leste and the Greater Sunrise developers, it is unlikely that the issue was resolved during that particular meeting.

Looking towards future negotiations, it will be a surprise if Gusmão shifts from his long-held position of having the Greater Sunrise LNG processed in Timor-Leste. During his government, Gusmão already committed over two billion dollars to a detailed site survey for the Beaço LNG project. Recently-elected Alkatiri also cannot afford any compromises in the deal and risk a public backlash. That means that the developers, led by Woodside, will have to come up with a compromise. From their perspective, it is difficult to see the companies agreeing to process the gas in Beaço. ConocoPhillips, which holds a thirty per cent stake in the Greater Sunrise Joint Venture (only three per cent behind leading stake holder, Woodside), will likely push for the gas to be processed at its facility in Darwin. Many Australian analysts have questioned the geographical feasibility of a gas pipeline that crosses the depths of the Timor Trough from Greater Sunrise to Timor-Leste, while others have argued that the proposal is not economically sound. The prospects for Greater Sunrise are looking brighter again but, for the project to move forward, further compromises will have to be made.

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