Background and facts on Sunrise LNG debate

Woodside just announced that they prefer a floating LNG plant to process natural gas from the Greater Sunrise field in the middle of the Timor Sea, rather than piping it to either Australia or Timor-Leste. After fielding numerous inquiries from NGOs, journalists, embassies, oil companies and others about this issue, La’o Hamutuk has created a new web page with background information, documents, history and analysis. We will continue to add to it as we have time, and as more information becomes available.

See The following is the main text, but the web page has additional information and graphics:

The Greater Sunrise Oil and Gas Project
29 April 2010
The Greater Sunrise oil and gas field in the Timor Sea has been the subject of exploration, controversy, and negotiations since it was first discovered in 1974. In particular, the question of where to liquefy the natural gas — converting it into LNG which can be shipped to overseas customers — has been vociferously debated since Indonesia was forced out of Timor-Leste in 1999.

After moving ahead in fits and starts, the Sunrise project is now getting closer to reality. This web page will include information and analysis about the project, especially events in 2010. For background and basic information, see the references linked to from the history section below.

Over the last few months, the discussion over Greater Sunrise has intensified, with Timor-Leste’s government, other Timorese politicians and NGOs, Woodside, the Australian government and many commentators offering their views. Timor-Leste media have been filled with polemics and misinformation regarding the Greater Sunrise gas field and the LNG plant that will go with it. La’o Hamutuk is a Timorese civil society organization which hopes that this project will give the maximum benefit to the Timorese people. We are concerned that many of the reports misrepresent the reality of the situation, which has economic, legal, technical and environmental aspects, not only politics, and we hope that this web page will help people better understand the issue.

History and background

In February 2008, La’o Hamutuk published a book Sunrise LNG in Timor-Leste: Dreams, Realities and Challenges, which is on-line in English and Bahasa Indonesia, with a summary in Tetum. The report includes a history of relevant events from 1970 through 2008.

The Sunrise controversy is entangled in the troubled history of maritime boundary negotiations between Timor-Leste, Australia and Indonesia which dates from before the Indonesian invasion. Follow this link for texts and commentary on the 2006 CMATS agreement or read a La’o Hamutuk Bulletin overview report from that time or a later 2007 article.

In 2004, La’o Hamutuk wrote a briefing paper for Timor-Leste’s boundary negotiators entitled The Case for Saving Sunrise, suggesting that there was no advantage to Timor-Leste in developing the Sunrise field quickly, and that a delay of 10-15 years would greatly increase the benefits Timor-Leste’s people would receive. Six years have passed, and our subsequent research confirms this view, which is now supported by many of Timor-Leste’s leaders.

During 2008 we published a primer on LNG Basics and an article on potential benefits from Sunrise LNG in Timor-Leste.

The companies

The Sunrise project is operated by Woodside (Australia), which has a 33% share in the project shared with joint venture partners ConocoPhillips (USA, 30%), Royal Dutch Shell (UK/Netherlands, 27%) and Osaka Gas (Japan, 10%). They maintain that the development plan is strictly a commercial decision, to be made in the best financial interests of their stockholders and the Australia and Timor-Leste governments, under the rules as defined by the 2002 Timor Sea Treaty, the 2003 Production-Sharing Contracts, the 2003 International Unitization Agreement and the 2006 CMATS Treaty.

In June 2008, Woodside presented a “Concept Screening” report to the Australian and Timorese regulators, finding that a pipeline to Timor-Leste would be less profitable than a floating LNG project or a pipeline to Darwin. After world oil market prices collapsed later that year, they redid the study and reached the same conclusions the following year. Woodside promised to announce their decision between a mid-sea floating LNG plant (the first in the world) and expanding the existing LNG plant in Darwin by the end of 2009, but did not meet their deadline. Woodside’s Annual Report from 2009 explained their view of the Sunrise project as of the end of that year.

Shell, which would like to develop floating LNG technology for use at other fields, has long supported this option. ConocoPhillips, on the other hand, built and operates an LNG plant at Wickham Point in Darwin, where the gas piped from Bayu-Undan is processed. They would like to expand that facility to liquefy Sunrise gas as well.

The governments

In mid-2008, Timor-Leste’s State Secretariat for Natural Resources (SERN) created a Sunrise Task Force to develop their own information on the technical, economic and social aspects of the Sunrise project. The Task Force, with help from Petronas and a bathymetric (seabed depths) study supported by Korea Gas, concluded that a pipeline to Timor-Leste is technically possible — a view which is also held by Woodside and Australia in recent years. Although the Task Force report has not been made public, it questions Woodside’s determination that a pipeline to Timor-Leste is less profitable than the other options. However, as neither side has yet shared the details of their assumptions and analysis with the other, it is difficult to perform an independent assessment. Only one option will be chosen at the end of the day, regardless of whether others are also feasible.

La’o Hamutuk arranged a briefing by the Sunrise Task Force for ourselves and other civil society groups in February 2010, but we were not given technical details and are not at liberty to publish specifics. However, it is clear that the united Timor-Leste view is that the pipeline must be brought to Timor-Leste — that this is the only fair outcome, since the pipeline for the other large gas field in the Timor Sea (Bayu-Undan), has already been built to Australia. Timor-Leste’s Government hopes to use an onshore LNG plant in Beacu (Viqueque district) as the engine and centerpiece of a “national petroleum corridor” stretching westward along the south coast to Suai. By developing local industry, expertise and spinoffs, they hope to wean this country away from dependency on oil rents (royalties and taxes) and toward productive activities which can continue to thrive after the Sunrise and Bayu-Undan fields are empty. La’o Hamutuk hopes that this is possible, although we believe that now enough has been done yet in education, law-making, planning and infrastructure sectors for Timor-Leste to maximize its benefits from Sunrise LNG.

Australia has largely remained silent on the pipeline route, saying it’s a matter for the companies to decide, However, this is disingenuous as Australia actively negotiated the three relevant treaties with Timor-Leste, and had largely achieved its goals by 2007. On 28 April 2010, the Australian Ambassador responded to accusations that his government had threatened Timor-Leste.

The public debate in 2010

In early 2010, the Government of Timor-Leste decided to take a hard public line: they would not approve any development plan which didn’t include a pipeline to Timor-Leste and an LNG plant on the south coast. A 13 January press release Woodside’s development plans will not be approved for Greater Sunrise (also Tetum) provoked extensive coverage in the local and international media. Over the next week, comments emerged from Woodside, Australia and Petronas, and it was clear that Timor-Leste had brought renewed attention to the debate. However, Timor-Leste has consistently said that it will keep its legal commitments in treaties and contracts Timor-Leste has already signed.

A month later, the RDTL Government publicly attacked former Prime Minister Mari Alkatiri (also Tetum) for offering suggestions on the Sunrise question. When President Jose Ramos-Horta suggested that a floating plant might be a compromise decision, the Government also disagreed. On 10 April, the Government spokesperson reaffirmed his January statement that any plan not involving an LNG plant in Timor-Leste would be rejected.

After repeated delays, on 29 April 2010 the Sunrise Joint Venture announced its preference for a floating plant. They expect to propose a Field Development Plan to Timor-Leste and Australian authorities in the next few weeks, and hope to move the discussion from polemics to details. Timor-Leste authorities have yet to respond.

La’o Hamutuk will continue to follow and publish on this issue, and we welcome materials from all sources.

La’o Hamutuk (The Timor-Leste Institute for Development Monitoring and Analysis)
P.O. Box 340, Dili, Timor-Leste (East Timor)
Telephone: +670-3325013 or +670-734-0965 mobile
email: website: skype: cscheiner


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