DATE=11/8/1999
TYPE=BACKGROUND REPORT
TITLE=EAST TIMOR - INDONESIA OIL
NUMBER=5-44722
BYLINE=STEPHANIE MANN
DATELINE=WASHINGTON
INTERNET=YES
CONTENT=
VOICED AT:
INTRO: As East Timor goes through its transition from
Indonesian province to independent country, one
important question arises: How will the new state earn
a viable income? Some income can be expected from
coffee, fish, and timber. But most analysts agree the
most promising potential source of revenue for East
Timor comes from offshore oil and gas reserves. As V-
O-A's Stephanie Mann reports, profits from exploiting
those resources are now being divided between
Indonesia and Australia.
TEXT: In 1992, Indonesia and Australia signed a
treaty that divides the waters between Timor island
and Australia into three zones for the purpose of
extracting oil and gas resources. The Timor Gap
Treaty stipulates the share of the revenues earned by
each party in the three zones.
// OPT // In the area closest to Australia, that
country takes 90-percent of the profits and Indonesia
takes 10-percent. In the zone closest to East Timor -
which was then an Indonesian province - Indonesia
earns 90-percent and Australia 10-percent of the
profits. In the middle zone, the two countries split
the profits 50 - 50. //END OPT//
Ten-years ago there were hopes that Timor Gap waters
might yield oil production on a par with Kuwait, which
produces two-and-one-half million barrels a day. But
exploration in Timor Gap has not come close to those
initial expectations.
An Indonesian energy expert at the East-West Center in
Hawaii, Wawan Prawiraatmadja (pra-weer-ah-AHT-mah-jah)
says only the middle zone is yielding oil and gas at
this time.
// WAWAN ACT ONE //
So far, it is very discouraging. Current
production is only about 30-thousand barrels per
day. And it is going to decline. But they say
there are some reserves found for about 300 to
400-million barrels, and about three-point-five
trillion cubic feet of gas. . For a company, it
can be quite significant, but for a country, it
is not really that significant.
// END ACT //
Mr. Wawan says the maximum oil production that might
be expected in 10-years would be 300-thousand barrels
a day. But he says in the immediate future, oil
production is likely to decline as reserves are
depleted at the current sites. So, Mr. Wawan says
East Timor should not expect huge profits right away.
// WAWAN ACT TWO //
From the current production, Indonesia has been
getting as much as three-million U-S dollars
[for] almost a year... So, I think it is about
two-million to three-million U-S dollars a year
of income that can be expected by the East
Timorese. But the current production, I
understand, is going to decline. So, until the
next find is going to be produced - which is not
going to be until the year 2003 (or) 2004 -
there is not much income that can be expected.
// END ACT //
Another Indonesia specialist who closely follows
energy issues, James Clad, says Timor Gap gas reserves
are more promising than the oil reserves. But in both
cases, he says profitability is complicated by the
need for significant initial investments.
// CLAD ACT ONE //
The amount of investment required, the period of
time required to get this on line is significant
enough and long enough so that the East Timorese
can not rely on this as some kind of magic wand
to fix their economic problems right away.
// END ACT //
Mr. Clad is a professor at Georgetown University and
the director of Cambridge Energy Research Associates,
a Washington-based firm that advises energy companies.
He says the long-term potential for East Timor to
profit from oil and gas exploitation is pretty good if
the new state takes Indonesia's place in the Timor Gap
Treaty.
// CLAD ACT TWO //
It is all a question of the intention of the
parties. For example, if the maritime
boundaries with Indonesia and East Timor are not
clear, then Indonesia may take the view that it
sees the Timor Gap Treaty as not something that
can pass without alteration to the new
independent East Timorese government. It is
really for Indonesia to be cooperative in this
regard so that the new government of East Timor
and the Australian government simply announce
that they are respecting the treaty and all its
particulars.
// END ACT //
Mr. Clad says it is not yet known if new treaty
negotiations will be needed.
Wawan Prawiraatmadja (of the East-West Center) says he
expects Indonesia will allow East Timor to simply take
over its place in the Timor Gap treaty.
// OPT // He points out that income from Timor Gap
has not been significant for Indonesia, which produces
one-and-one-half-million barrels a day at its other
oil fields. Mr. Wawan also says oil companies do not
care whether their contracts are with Indonesia or
East Timor, as long as revenue sharing arrangements
continue unchanged. // END OPT //
But Mr. Clad cautions that political transitions
underway in both Indonesia and East Timor can affect
the way the oil issue is resolved.
In Jakarta, the new government of President
Abdurrahman Wahid has not decided all its policy
directions, and in East Timor, the political shape of
the new government has not been determined. Mr. Clad
says oil companies and financial investors will be
watching closely to decide if the possibility for
secure profits outweighs the political risks.
(SIGNED)
NEB/SMN/RAE
08-Nov-1999 13:06 PM EDT (08-Nov-1999 1806 UTC)
NNNN
Source: Voice of America
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