Financial Times: Impasse halts Sunrise project: “Woodside Petroleum, Australia's biggest oil and gas producer, said yesterday it would halt its investment in the A$6.6bn (US$5.1bn) Sunrise project in the Timor Sea following the breakdown of talks between Australia and East Timor over how to split the revenues.”: ”Royal Dutch/Shell, which has a 34 per cent stake in Woodside, also has a 26 per cent stake in Sunrise…” (ShellNews.net) 18 Nov 04

By Lachlan Colquhoun in Sydney and Shawn Donnan in Jakarta

Published: November 18 2004

Woodside Petroleum, Australia's biggest oil and gas producer, said yesterday it would halt its investment in the A$6.6bn (US$5.1bn) Sunrise project in the Timor Sea following the breakdown of talks between Australia and East Timor over how to split the revenues.

Woodside's director of gas, David Maxwell, told investors in Sydney that the liquefied natural gas project was "likely to stall". Income from the project is seen as vital to ensuring the economic viability of the fledgling East Timorese state, which won independence from Indonesia in 1999 through a United Nations-backed referendum.

"That looks like the most likely scenario," Mr Maxwell said. "What does 'stall' mean? It means we won't spend any more money."

Woodside, which holds a 34.4 per cent stake in the development and is expected to be its operator, had said earlier this year that if there was no agreement between Australia and East Timor by January 1 it might be forced to mothball the project.

But yesterday's tough remarks put additional pres sure on the two countries to resume talks, which broke down last month with both sides blaming each other for the deadlock.

Sunrise, which would tap gas reserves estimated to be worth up to A$25bn, involves the most significant resource in the Timor Sea, which lies between Australia and East Timor. Revenues from the project are expected eventually to provide the biggest income stream for East Timor, which ranks among the poorest countries in Asia.

Jose Teixeira, East Timor's resources and energy minister, said yesterday that no further talks with Australia were planned.

"It was the Australian delegation that cut the talks short and said 'No more talks'," he said. "We think quite clearly the ball is now in the Australian government's court."

Royal Dutch/Shell, which has a 34 per cent stake in Woodside, also has a 26 per cent stake in Sunrise, while ConocoPhillips has 30 per cent. The remainder is held by Osaka Gas.

The Sunrise partners have already spent A$250m on the project, and planned to spend another $80m next year. But further investment is now unlikely to go ahead without a deal between Australia and East Timor.

The disagreement between the two countries hinges on a disputed maritime boundary. Canberra contends the boundary should be the continental shelf which comes within 70kms of the East Timorese coast. East Timor argues the border should be drawn at the midway point between the two countries.

Talks between the two states broke down last month after East Timor rejected an offer of up to A$3bn in extra revenues if it agreed to defer boundary talks for 100 years.

Woodside said that until the sea boundary negotiations were resolved it would concentrate on other projects, including the Browse project, which sits in Australian waters in the Timor Sea.