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East Timor, Australia Agree On Sunrise Deal But Gas On Hold
Wednesday March 5, 3:35 am ET


MELBOURNE -(Dow Jones)- East Timor and Australia agreed Wednesday on terms for the potential development of their much-disputed Greater Sunrise gas fields in the Timor Sea, which hold tens of billions of dollars worth of gas.
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But the royalty sharing agreement between the two countries means little in the near term given that the A$6 billion project is on the back burner until the companies driving it can find a viable market for the gas.

Central to the inter-government dispute over Sunrise was East Timor's move, after independence from Indonesia last year, to claim a maritime boundary that overlaps Australia's. Both sides were concerned to ensure that any agreement over Greater Sunrise wouldn't prejudice their positions on a permanent maritime boundary.

Under the existing boundary, 80% of Greater Sunrise lies in Australian waters with the remaining 20% in the so-called Joint Petroleum Development Area shared by the two countries. Poverty-stricken East Timor is claiming a permanent maritime boundary that would potentially take in all of Greater Sunrise.

"The negotiated text is, I believe, truly nonprejudicial to either country's position on permanent maritime boundaries," East Timor Prime Minister Mari Alkatiri said in a statement.

"The negotiations were complex and difficult, but I am personally pleased with the outcome," Alkatiri said.

The Greater Sunrise project was put on hold in December when two rival field development options were both found to be unviable.

The decision followed months of wrangling between the partners as U.S.-based ConocoPhillips pressed for the gas to be piped 500 kilometers to shore in Australia's Northern Territory while Royal Dutch/Shell Group wanted to develop Greater Sunrise as an offshore liquefied natural gas plant. Shell's plan would have utilized its own floating LNG technology and targeted markets in the U.S. Joint venture leader, Australia's Woodside Petroleum Ltd. , had backed the Shell plan.

But after an exhaustive study the partners decided that the market in Australia wasn't big enough to justify bringing the gas ashore, while a volatile and low-priced U.S. market was judged too risky for the Shell plan.

Greater Sunrise is believed to contain 8.35 trillion cubic feet of gas.