New Internationalist

The blessed curse

Issue 361

Quinton Temby exposes the negotiations to pipe oil and gas away from East Timor – and the profit and jobs that flow away with them.

As development of the rich oil and natural gas reserves in the Timor Sea near East Timor takes off, the Government hopes that investment by oil-industry giants will bring the petroleum onshore for processing. Ten thousand jobs could be created and untold billions of dollars added to the Gross Domestic Product. The potential investment, it says, represents ‘genuine national-interest considerations that may well outweigh royalty and tax-revenue benefits’. But this government hype is from Australia’s Northern Territory, where gas from the Timor Sea will be piped. The only benefits to the national interest will be Australia’s.

What then of East Timor? Australia’s northern neighbour is indeed reliant on its cut of the Timor Sea royalties to transform it from the poorest country in Asia to a viable, independent nation. In the first major development, at Bayu-Undan, gas will be extracted by US oil company ConocoPhillips, piped to Australia for processing and then shipped to Japan for sale.

The Bayu–Undan Pipeline

Length of proposed pipeline: 500 kilometres from the Bayu-Undan gas field, Timor Sea to Darwin, Australia.

Corporate owners: ConocoPhillips (project operator), with co-venturers AGIP, Santos and INPEX.

Cost of building: estimated at $500 million, plus $1 billion for the liquid natural gas (LNG) plant in Darwin which it connects to.

Volume of gas transported: up to 750 million cubic feet of gas per day.

Countries to which gas is to be exported: 3 million tons of LNG a year to Japan from 2006 for 17 years.

East Timor will receive about three billion US dollars in royalties and taxation over the 17-year life of the project. But with all the investment set to occur in Australia, some observers are concerned East Timor is missing out on its best chance yet to jump-start development.

The oil companies claim that a pipeline to East Timor – unlike one to Australia – isn’t technically feasible. But Australian oil-industry engineer Geoffrey McKee cites one engineering study that concluded it would not only be feasible but cheaper than a pipeline to Australia.

He believes that the oil companies have ‘grossly misled’ East Timor about the viability of a pipeline. In a submission to the Australian Parliament, he wrote: ‘This has deprived East Timor of the most important nation-building benefit to be derived from its Timor Sea resources, namely infrastructure and an energy-export industry located on her shores.’

Veteran campaigners for East Timor’s independence, like Australian agricultural scientist Rob Wesley-Smith, see the justice in East Timor taking delivery of its own resources. He says that a pipeline could deliver gas to generate electricity, halting the massive deforestation that began when people lost access to subsidized Indonesian fuel and turned to their trees for firewood. Gas would also be a much cleaner source of energy than the current system of diesel-powered generators.

But the push for a pipeline is destined to turn into a dispute between East Timor on one side and Australia and the oil companies on the other. In the next major Timor Sea development of the Greater Sunrise reserves, Australia supports a plan by Shell to process the gas it extracts on the world’s first floating processing platform. By contrast, a pipeline that will bring the gas to its shores is East Timor’s ‘preferred option’.

Preferred by Government, but not by NGOs. Lao Hamutuk, an NGO that monitors international institutions in East Timor, is wary of encouraging the oil industry. After hosting a delegation from the Ecuador-based Oilwatch Network last year, they wrote in their bulletin: ‘oil and gas dependent countries are characterized by high child mortality, malnutrition and disease, poor education and illiteracy, corruption, authoritarianism, vulnerability to economic shocks and high military spending. East Timor already has some of these problems as a result of colonialism, occupation and war – but oil money alone will not solve them. In fact, the experience of other countries shows that it often makes them worse.’

By contrast the East Timorese Government says it isn’t in a position to dispense with oil and gas development. It’s trying to build a nation from the ruins of Indonesian colonialism and is dependent on donor countries to fund its meagre budget. Generosity waned in the lead-up to formal independence last year, when international donors began to demand an ‘exit strategy’. Initially, they put pressure on East Timor to take out World Bank loans. But East Timorese leaders saw this could compromise their entire development strategy. According to Prime Minister Mari Alkatiri, they agreed instead to cut the budget by 45 per cent and have it tied to the immediate development of the Timor Sea. ‘It was not easy to make this decision,’ Alkatiri recalled in a conference with international activists. ‘[But] if you don’t want loans and if you don’t get real money from donor countries, you can’t really govern this country.’

Disagreement about whether pipelines should run north to East Timor or south to Australia is only part of a more fundamental and on-going dispute between the region’s poorest and richest country over sovereignty in the Timor Sea. It began when East Timor was a Portuguese colony, and took a turn in Australia’s favour when, in 1975, Indonesia was poised to invade East Timor. In a secret cable two months before the invasion, Australia’s Ambassador to Indonesia, Richard Woolcott, encouraged his Government to support the invasion because boundaries could be much more easily negotiated with Indonesia than either Portugal or an independent East Timor. This support would, he said, be in the interests of the Department of Minerals and Energy.

Woolcott was right. In 1989, after protracted negotiations, the Australian and Indonesian Governments signed the Timor Gap Treaty, carving up the oil and gas reserves. The treaty appeared to be a generous trade-off with Australia, in return for diplomatic support for Indonesia’s illegal occupation of East Timor. For supporters of East Timor it was the ultimate blood-for-oil deal, which sacrificed the fate of a whole people for financial gain. For East Timor’s guerrilla leader and future president, Xanana Gusmao, it was a ‘total betrayal’ in which Australia had been an accomplice to genocide in order to secure its oil and gas interests in the Timor Gap.

Australia’s diplomatic support for Indonesia was only punctured by protests in 1999, after East Timor’s UN-sponsored vote for independence was followed by violent military retribution. In September 1999 Australian-led UN peacekeepers entered East Timor to usher out Indonesian troops and secure the country. Only two months later, with East Timor still smouldering, Australia received its first big windfall from the Timor Sea as billions of dollars of oil began pumping out of the highly disputed Laminaria and Corallina reserves. At this time East Timor must have been the most devastated nation on Earth. Seventy per cent of its infrastructure had been destroyed and most of its people had been driven from their homes. According to the United Nations Development Programme, East Timor had the lowest income per head in the world.

Nevertheless, from 1999 to 2002 the Australian Government took an estimated $1.2 billion in revenue from Laminaria-Corallina. For the same period Australia gave East Timor $200 million in aid. Despite this theft of East Timor’s resources at such a critical stage of its development as a nation, Australia’s Prime Minister John Howard describes his country’s role in East Timor’s independence as ‘without question the most positive and noble act by Australia in the area of international relations in the last 20 years.’

Australia has been an accomplice to genocide in order to secure its oil and gas interests in the Timor Gap

While East Timor was a UN protectorate, Australia also pressured it into adopting essentially the same treaty it had enjoyed with Indonesia. On 20 May 2002 – East Timor’s first official day of independence – the new Timor Sea Treaty was signed. Its main effect is that, despite the end of the Indonesian occupation, Australian control of the Timor Sea is perpetuated. According to Vaughan Lowe, Professor of International Law at Oxford University, the treaty will prevent East Timor from establishing its rightful maritime boundaries in accordance with international law. As a consequence, oil-industry engineer Geoffrey McKee estimates that almost 60 per cent of East Timor’s resources – some $20 billion worth of oil and gas – will go to Australia.

In spite of this, East Timor is determined to regain its maritime territory occupied by Australia. However, the arguable Australian claim that the seabed is part of its continental shelf cannot be legally tested. In March 2002, when East Timor looked like it could challenge Australia in the International Court of Justice, Australia abruptly withdrew from the court’s jurisdiction on maritime boundaries.

Prime Minister Alkatiri described this as ‘an unfriendly act’. Since then, relations between the two nations have deteriorated further. Alkatiri has said he will attempt to block development of the Greater Sunrise field until Australia agrees to negotiate on maritime boundaries. ‘Just as we fought to protect our right to our land, we must fight to preserve our right to our sea,’ he told parliament recently.

While the dispute between the two countries is stirring the same defiant nationalism in East Timor that marked its long struggle for independence, Australia’s attitude appears unrepentantly colonial. Australia’s Foreign Minister, Alexander Downer, once arrived in the capital, Dili, at short notice and charged into East Timor’s cabinet room with an imposing entourage. A leaked transcript of that meeting reveals Downer warning Prime Minister Alkatiri: ‘We are very tough. We will not care if you give information to the media. Let me give you a tutorial in politics.…’

Paradoxically, Alkatiri has an even worse relationship with the leading Australian supporters of East Timor than he does with the Australian Government. While Australian activists have lobbied against their country’s bullying of East Timor, they’ve also been critical of the way Alkatiri has handled the oil and gas negotiations. The last straw for Alkatiri was in June last year when an expatriate Australian organized a demonstration over the Timor Sea Treaty outside East Timor’s Parliament. Attending an oil-industry conference in Australia at the time, Alkatiri announced that he would draft legislation to prevent foreigners from protesting in East Timor. Initially passed by the Parliament, it was vetoed by the President as ‘unconstitutional’. It now awaits a final decision by Parliament. If passed it will allow for foreigners to be deported if they ‘organize or participate in demonstrations, processions, rallies and meetings of a political nature’.

For a nation founded on political activism – in alliance with an international solidarity movement that saw East Timorese take their protest around the world – it’s a sad irony. With East Timor attempting to co-exist with powerful and often hostile Indonesian and Australian neighbours, popular and activist support in these countries is indispensable.

Quinton Temby is an Australian–based freelance journalist.

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