In late July Australia and East Timor appeared to have reached an agreement concerning the maritime boundaries between the countries and the huge oil and gas reserves located in these waters. East Timor reportedly offered $13 in revenues, which is an addition of $8 billion on previous offers. The agreement, which was announced after a meeting with Australian Prime Minister John Howard and East Timorese President Xanana Gusmao in Sydney, is expected to be formalised in August.

“Australia and East Timor have reached agreement on the treaty, the sea bed and the formula. This is a very fair and generous arrangement for East Timor”, explained Prime Minister John Howard. “It will mean that that country will receive several billion dollars more over the years ahead of what would otherwise have been under the earlier arrangement and I reject completely the complaints that are still being made by some that Australia has been unfair and ungenerous towards the people of East Timor. We have always accepted the need to help the people of East Timor, consistent with our obligations to the Australian taxpayer.”

East Timor’s Foreign Minister was also in Australia at the time and said “I believe it is only a matter of a few weeks before we are able to sign an agreement which, I sincerely believe, is a fair deal for the people of East Timor.”

Australian Foreign Minister Alexander Downer was also positive about formalising the agreement: “It will be a great agreement for East Timor and it solves our legal problems as well. We’re not so concerned about the money – we’re concerned about the principles of our boundaries.”

The negotiations date back to 1998, and last October it seemed a deal was within reach when East Timor changed its conditions for accepting an arrangement with Australia.

Woodside’s development of the Greater Sunrise gas field became a focus for negotiations when East Timor demanded that all processing be carried out in East Timor, despite the logistical difficulties this would involve. Under the terms of the recent agreement, the location for the development of the field will be decided by Woodside and East Timor. The arrangement is a major encouragement for the Greater Sunrise development, which Woodside maintained it could not proceed with until legal and fiscal certainty were reached.