Timor-Leste

Australia-Timor-Leste Maritime Arrangements

Australia and Timor-Leste brought the 2006 Treaty on Certain Maritime Arrangements in the Timor Sea (CMATS Treaty) and 2003 International Unitisation Agreement for Greater Sunrise (IUA) into force on 23 February 2007. The treaties establish a framework for the exploitation of the Greater Sunrise gas and oil resources and will see the equal sharing of upstream Government revenues flowing from the project. The CMATS Treaty represents an opportunity to underpin further the income and development of one of Australia's closest neighbours, while at the same time putting on hold the Parties' claims to jurisdiction and maritime boundaries in the Timor Sea for fifty years.

Current Arrangements in the Timor Sea

The 2002 Timor Sea Treaty is an interim agreement that is without prejudice to the position of either country on their maritime boundary claims. The Timor Sea Treaty provisionally gives Timor-Leste 90 per cent of petroleum production from within the JPDA. Development of the oil and gas resources, including the major Bayu-Undan field, is proceeding. Revenues have already started flowing, and it is estimated that Timor-Leste could earn as much as US$15 billion in revenues from the Bayu-Undan project alone.

The IUA, signed by Australia and Timor-Leste on 6 March 2003, provides the secure legal and regulatory environment required for the development of the Greater Sunrise gas reservoirs. Under the Timor Sea Treaty, which is in force for both Australia and East Timor, Greater Sunrise is apportioned on the basis that 20.1 per cent falls within the JPDA and the remaining 79.9 per cent falls in an area to the east of the JPDA in which Australia regulates activities in relation to the resources of the seabed and subsoil. This apportionment reflects the geographical location of the resources. The IUA unitises the reservoirs on the same basis. Legislation implementing the IUA is in place. Due to the agreed resource split in the JPDA, under the IUA Timor-Leste would receive tax revenues from 18.1 per cent of the Greater Sunrise resource and Australia would receive tax revenues from 81.9 per cent.

The CMATS Treaty, signed on 12 January 2006, is a further interim agreement that is without prejudice to the position of either country on their maritime boundary claims. The principal aim of the treaty is to allow the exploitation of the Greater Sunrise gas reservoirs to proceed while suspending maritime boundary claims for a significant period and maintaining the other treaty arrangements in place.

While the formal apportionment of Greater Sunrise under the IUA remains the same, Australia will share equally (50:50) the upstream tax revenues from the resource. The Greater Sunrise project could result in transfers of revenue to Timor-Leste of as much as US$4 billion over the life of the project. The exact benefit to East Timor and Australia will depend on the economics of the project.

Both Australia and Timor-Leste are bound by the Treaty to refrain from asserting or pursuing their claims to rights, jurisdiction or maritime boundaries, in relation to the other, for 50 years. The two countries have undertaken to not commence any dispute settlement proceedings against the other that would raise the delimitation of maritime boundaries in the Timor Sea. Consistent with the CMATS Treaty and associated side-letters, Australia will continue regulating and authorising petroleum activities outside of the Joint Petroleum Development Area (JPDA) and south of the 1972 Australia-Indonesia seabed boundary.

Other initiatives established by the CMATS Treaty include: an independent assessment process at the request of either Party to review the reconciliation of the revenue sharing; Timor-Leste being able to exercise water-column (fisheries) jurisdiction within the JPDA; and the establishment of a Maritime Commission to constitute a focal point for bilateral consultations on maritime matters of interest to the Parties, including on maritime security, the protection of the marine environment and management of natural resources.

Map of Timor Sea Area

Map showing the Timor Sea, between the coast of Australia and Timor-Leste and Indonesia, indicating where the 'Joint Petrolleum Development Area (JDPA) is