Timor Sea Oil & Gas

A 30 minute “background briefing”

on 40 years’ history of the Timor Sea sovereignty wrangle
from 1962 up to the signing of the Timor Sea Treaty 2002
by
Geoff McKee
at
“5 YEARS ON….a celebration of EAST TIMOR’S
INDEPENDENCE REFERENDUM”
Leichhardt Town Hall, August 30, 2004

Prepared by Geoffrey McKee • © G A McKee & Associates Pty Ltd • Oil & Gas Project Development Services • Sydney
Speaker’s background…..
 1987 –1996 Timor Sea JV oil company
 1997 - now Oil & gas consultant
 2004 Guest lecturer, School of
Petroleum Engineering, UNSW
 INDEPENDENT PERSPECTIVE
(not aligned to any political party or oil company)

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 Perspective derived from……

 1998 – 1999: Timor Gap working group

reporting to through ETISC Darwin to JR
Horta
 2000: Petroleum-related Education &
Training for East Timorese (tender
preparation)
 2001 – 2002: Timor Sea concession dispute
(Oceanic Exploration/Petrotimor)
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 In memory of Andrew McNaughtan
1954 - 2003

Photo by H T Lee, October 1999

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Timor Sea Oil Exploration
When did it start?
 In 1962, Australia commenced
issuing exploration permits covering
the entire Timor Sea to the edge of
the continental shelf
 Portugal objected, claiming
jurisdiction to the median line
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1962 First oil exploration permits issued by Australia
Dili

4
Kupang 3
2
1
1

1
2

2
3
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1969 Drilling commences in Australian permits
Dili

Kupang

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October 16, 1970
The continental shelf becomes an issue
“Well informed sources in Jakarta say
that Indonesia has already prepared
maps showing the boundary of it’s own
‘continental shelf’ as the median line
between Australia and Timor”
- Australian Financial Review

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 1972 Australia celebrates “diplomatic coup”

Portuguese Timor Seabed boundary

agreed May 18, 1971

A16

Seabed boundary
agreed October 9, 1972
A17

Median line
(line of equidistance)
Seabed treaty
Geoff McKee - August 04 signed with
Timor Indonesia
Sea - a background briefing 9
1974 Woodside-Burmah-Shell permits
Dili

ndary
ea bbed Bou n
1972 S
Sunrise /
Troubadour

NT/P12

Kupang
NT/P11
NT/P8
WA-36-P

1972 agreed seabed boundary between Indonesia

and Australia coincides with northern limit of
Woodside’s 1963 exploration permits NT/P8 to
the west and NT/12 to the east.

Courtesy Woodside Petroleum, Mining conference, Dili, March 2003

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December 1974 Portugal asserts sovereignty

Map courtesy Oceanic Exploration / Petrotimor, Dili seminar, March 2002

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After 10 years’ negotiation, Indonesia and Australia could
not reach agreement on a maritime boundary in the Timor
Sea, leading to a “Joint Development Zone”.

December 11, 1989 Timor Gap Treaty signed

“The Timor Gap Treaty is a pretty shonky piece of work that is
a by-product of Indonesia’s illegal invasion of East Timor and
Australia’s collusion with Jakarta over this”
Andrew McNaughtan, Sydney Morning Herald, April 13, 2000
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July 22, 1998
First production of oil from the Gap
First production of oil from BHP’s Elang-Kakatua
discovery under the (illegal) Timor Gap Treaty’s
permit ZOCA-12.
This was at a time when Australian activists began
to sense that independence for East Timor was not
a distant dream, but a real possibility due to
changing historical circumstances caused by the
decline of the Soeharto regime.

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July 22, 1998
CNRT media release coincides with
first production of oil in the Timor
Gap
….designed to shift Australian
government perceptions through
adoption of a “pragmatic” approach.
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August 20, 1998 Sydney Morning Herald

….Andrew McNaughtan and ETISC arrange a

meeting that takes the Australian and Indonesian
governments by surprise, further changing
perceptions about the “Timor Gap problem”.
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January 13, 1999
Labor Opposition moves the goalposts….

ALP media release quantifies potential

revenue to East Timor and calls for ET
representation on the Joint Authority and
Ministerial Council

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8 September 1999
Dili burning
At the the Senate East Timor
hearings in Darwin
 Andrew McNaughtan and
Rob Wesley Smith interviewed by
shocked and confused Senators
 Jim Godlove of Phillips
Petroleum sticks to the main
game and undermines East
Timor pipeline vision for Bayu-
Undan
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 April 1, 2000

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 April 13, 2000
Headlines in Sydney
Morning Herald

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June 14, 2000 Timor Sea conference in Canberra
Professor Victor Prescott
University of Melbourne
•Generally confirmed
Timor Gap Treaty lateral
boundaries as lines of
equidistance
• notes small error in
eastern lateral (2 nautical
miles)
• Galbraith advised of
Jeffery Smith’s work
suggesting wider claims
for East Timor
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 September 13, 2000

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November 24, 2000
Australia warns East Timor on
the lateral boundaries
2nd round of talks , Regent Hotel, Singapore
Australia: Michael Potts DFAT
John Hartwell, DSIR
Rebecca Irwin, AG’s
UNTAET Peter Galbraith
Mari Alkatiri
Jonathan Prentice

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 February xx, 2001
Senior UNTAET Advisor
recommends declaration of
EEZ

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9 April, 2001 APPEA Conference, Hobart
Peter Galbraith's powerful keynote address:-
 Issue of lateral boundaries publicly
raised by East Timor for the first time
 The finest expression of an
uncompromising “Justice Case”
“As the product of an illegal occupation,
the Timor Gap Treaty is itself illegal”
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April 23, 2001
Strident media reaction to Galbraith’s
address

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June 26, 2001 Petrotimor takes a stand
Sydney Morning Herald

Americans threaten to derail Timor oil talks

By Jane Counsel

PetroTimor's chief executive, Mr. Charles Haas, said the

company planned to lodge a statement of claim in the
Australian Federal Court within the next fortnight seeking
legal recognition of a 1974 exploration concession granted
over a large part of the Timor Sea.

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Dili
July 5, 2001
Timor Sea
Arrangement
agreed

…..Pragmatism prevails
Geoff McKee - August 04 Timor Sea - a background briefing 27
 5 July 2001
Australia / East Timor ‘Joint Petroleum Development Area’

A16 Greater
Sunrise

A17 Evans Shoal

Bayu-Undan

Laminaria-Corallina

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July 6, 2001 Tax wrangle commences
Tax wrangle commences one day after signing the
Timor Sea Arrangement.
Opinion piece in the Sydney Morning Herald by
Mari Alkatiri and Peter Galbraith

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Offshore fiscal regimes
compared…..
State take
UK 31%
New Zealand 47%
Australian PRRT 62%
Timor Gap ZOCA 74%
Iraq 93%

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July 31, 2001
Bayu-Undan Participants Defer Offshore
Gas Pipeline Investment Decision

August 10, 2001

Shell floats LNG spoiler

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August 2001.
East Timorese “out-maneuvered” by Phillips Petroleum taxation wrangle

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October 10, 2001
UN personnel
banned from any
contact with
Petrotimor or
their associates

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December 21, 2001

Phillips Announces Agreement with East

Timor on Bayu-Undan Gas Development

“U-turn” by East Timor

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January 4, 2002
Petrotimor/Oceanic Exploration submit
proposed seabed delimitation proposal to Mr.
Mari Alkatiri and the transitional government
March 13, 2002
Meeting between Galbraith and Vaughan
Lowe and representatives of
Oceanic/Petrotimor

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March 22, 2002 Lowe-Carleton-Ward opinion released to
public in Dili seminar conducted by Oceanic Exploration

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Lowe-Carelton-Ward: Small Indonesian islands have big
impact on adjacent coast’s lines of equidistance.

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Oceanic Exploration commission pipeline study.

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Australia asserts seabed sovereignty outside the JPDA

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May 20, 2002
Independence Day

Timor Sea Treaty

Signed by Prime
Minister’s Howard and
Alkatiri

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