Australia and Timor Leste settle maritime boundary after 45 years of bickering



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After nearly two years of a facilitated conciliation process, Australia and Timor Leste have finally reached agreement on a maritime boundary in the Timor Sea.
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Donald R. Rothwell, Australian National University

After nearly two years of a facilitated conciliation process initiated under the 1982 United Nations Convention on the Law of the Sea, Australia and Timor Leste have finally reached agreement on a maritime boundary in the Timor Sea.

The treaty, signed at the UN in New York by Australian Foreign Minister Julie Bishop and Agio Pereira for Timor, will enter into force once all relevant domestic processes have been completed in Canberra and Dili.

This is the latest development in the saga of the Timor Sea, which has been contested for more than 45 years by Australia, Portugal, Indonesia and Timor Leste.

Ownership and control of significant oil and gas reserves, some of which remain undeveloped, are at the centre of the dispute. This partly explains why, despite previous treaties, there has never been a conclusive settlement of the maritime boundary.




Read more:
Australia and Timor Leste reach a deal on the Timor Sea – but much remains unknown


The 2018 treaty seeks to permanently settle the Australia/Timor Leste maritime boundary, albeit with the potential for future adjustments subject to negotiations between Timor and Indonesia.

A long time coming

Since the 1970s, Australia has been engaged in negotiations first with Portugal, then Indonesia, and finally Timor Leste over the maritime boundary. Portugal rebuffed Australian approaches in the early 1970s, mindful of developments in maritime law that promised them a better deal.

Indonesia, which occupied Timor from 1975, was more willing to negotiate. A joint development zone was agreed on that broadly shared oil and gas revenue on a 50/50 basis, but set aside a permanent maritime boundary for future settlement.

That arrangement collapsed following Indonesia’s 1999 withdrawal from Timor, and was replaced in 2002 by the Timor Sea Treaty between Australia and the newly independent Timor Leste.

However, the Timor Sea Treaty was again based on a joint development regime –though with a 90/10 revenue split in favour of Timor – and negotiations on a permanent maritime boundary were set aside for up to 40 years.

The treaty also did not satisfactorily deal with the Greater Sunrise oil and gas field in the north east quadrant. While a subsequent 2003 unitisation agreement sought to provide some commercial certainty for the multinationals wanting to develop the field, Dili remained firmly of the view that it was getting a bad deal.

In particular, the generation of Timor’s leaders who led its independence movement placed great importance on the new country having settled land and maritime borders. That the Timor Sea boundary with Australia was not settled remained contentious in Dili. The situation was exacerbated by allegations of Australian spying during treaty negotiations and a Greater Sunrise revenue split that favoured Australia.

Key features

The 2018 treaty contains six prominent features. First, it provides for a southern boundary between Timor Leste and Australia that approximates a mid-way between relevant coastal features. This is consistent with the modern law of the sea.

Second, there is a straight line western lateral boundary that runs from the western terminus of the 1972 Australian Indonesian Seabed Boundary south to the median line.

The new maritime boundary between Australia and Timor Leste.
Department of Foreign Affairs and Trade

Third, the eastern lateral boundary comprises a number of segments that extend much further to the east and north east than the 2002 treaty, ultimately giving Timor Leste much greater entitlements over the Greater Sunrise field.

Fourth, a Greater Sunrise Special Regime is created in which the two countries agree to share the upstream revenue either on a 80/20 basis in favour of Timor, if processing occurs by way of a pipeline to an Australian LNG processing plant, or 70/30 in favour of Timor if a pipeline runs to Timor.

Fifth, Timor gains 100% access to the future upstream revenue of the existing oil and gas fields that were previously part of the 2002 Joint Petroleum Development Area.




Read more:
What’s behind Timor-Leste terminating its maritime treaty with Australia


Finally, taking into account these new arrangements will ultimately need to accommodate any maritime boundaries that Timor may negotiate with Indonesia, there is some capacity for adjustment of the eastern and western lateral boundary lines, though only after the commercial depletion of seabed resources in the area.

Unique, but still unresolved

The conciliation process has yielded a unique treaty. It is the first of its type that not only involved the two states, but also the Greater Sunrise Joint Venture partners, including Woodside, Conoco Phillips, Shell, and Osaka Gas.

Timor initiated the conciliation, engaging an independent third party in an effort to break the maritime boundary impasse. It succeeded in getting Australia to abandon its long held opposition to a permanent Timor Sea maritime boundary, and has been able to substantially modify the development regime for Greater Sunrise.

The ConversationNotwithstanding these achievements, some matters remain unresolved, including the location of the LNG processing plant. Whether the plant is located in Australia or Timor is ultimately a commercial decision, but could become the source of ongoing bickering given the significant downstream benefits at stake and implications for Timor’s economic future.

Donald R. Rothwell, Professor, ANU College of Law, Australian National University

This article was originally published on The Conversation. Read the original article.

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What’s behind Timor-Leste terminating its maritime treaty with Australia


Rebecca Strating, La Trobe University

The government of Timor-Leste has officially notified Australia of its wish to terminate the 2006 Treaty on Certain Maritime Arrangements in the Timor Sea (CMATS). The treaty sets out the division of revenue from the Greater Sunrise oil and gas fields, an estimated A$40
billion deposit in the Timor Sea.

The maritime border between Timor-Leste and Australia has been a source of contention over recent years. But the decision to terminate the treaty and begin negotiations anew could have serious ramifications for Timor-Leste’s economic development, given its dependence on the Timor Sea resources.

The CMATS treaty

The CMATS treaty was designed to enable the joint exploitation of the Greater Sunrise field. The treaty circumvented the competing border claims by placing a 50-year moratorium on negotiating maritime boundaries betweeen Australia and Timor-Leste.

The Sunrise International Unitisation Agreement, finalised in March 2003, agreed that 20.1% of Greater Sunrise was located in the Joint Petroleum Development Area (JDPA) established under the 2002 Timor Sea Treaty and 79.9% within Australia’s jurisdiction.

If the maritime border was drawn halfway between Australia and Timor-Leste, the oil and gas fields would fall completely within Timor-Leste. Under CMATS, however, Timor-Leste negotiated a 50:50 revenue-sharing arrangement.

Scrapping the CMATS

Timor-Leste has long considered this treaty invalid. In recent years, the governments of Timor-Leste and Australia have been unable to agree on how the Greater Sunrise gas should be processed.

In 2013, Timor-Leste initiated proceedings against Australia at an arbitral court (in the Permanent Court of Arbitration at The Hague) under the Timor Sea Treaty to invalidate CMATS. It did so on the grounds that Australia’s alleged spying on Timor-Leste’s negotiators in 2004 contravened the Treaty of Vienna requirement that treaties be negotiated in “good faith”.

Timor-Leste favours an export pipeline to its south coast to enable its ambitious petroleum industrialisation plans. In contrast, Australia supported the decision of the licensee consortium, headed by Woodside, that the export pipeline was not the best commercial option.

When the CMATS treaty was negotiated, these disagreements were put aside in order to reach an agreement. However, this just delayed the seemingly irreconcilable dispute about developing the field.

Sovereignty

Timor-Leste’s government has developed a narrative that maritime boundaries are necessary for completing its sovereignty. This narrative has linked the independence movement to the sea disputes in order to bolster public support against Australia. Consequently, the moratorium on forming permanent boundaries had increasingly become a problem in relations between Australia and Timor-Leste.

In 2015, Timor-Leste’s government initiated a United Nations Compulsory Conciliation under Annex V of the UN Convention on the Law of the Sea (UNCLOS) in a bid to pressure Australia into changing its policies on Greater Sunrise.

Timor-Leste’s withdrawal from CMATS is not a surprise. In the opening statements of the conciliation process, Timor-Leste’s representatives flagged this as a likely action.

The careful wording of the joint statement makes it clear that the Australian government “recognises” Timor-Leste’s right to initiate the termination of the treaty. This does not suggest that Australia has substantially shifted its long-standing policies on the Timor Sea. However, the joint statement does indicate that the Australian government recognises that maintaining the CMATS treaty had become untenable.

Future negotiations

Terminating CMATS reflects a continuation of Timor-Leste’s high-stakes approach to Timor Sea diplomacy.

Negotiations on establishing a permanent maritime boundary will continue under the UN Compulsory Conciliation. This process is designed to help states resolve bilateral maritime disputes by providing recommendations from a panel of experts.

The Australian government has repeatedly emphasised the non-binding nature of these recommendations. While Australia has an obligation to negotiate in good faith, this does not mean it can be forced into agreeing to a maritime boundary. Negotiated boundaries still appear to be some way off.

Timor-Leste will be pushing for permanent maritime boundaries that will give Timor-Leste most, if not all, of Greater Sunrise in order to support its ambitious oil industrialisation plans.

Terminating the CMATS treaty ultimately means that the governments of Timor-Leste and Australia are back to square one in negotiations over Greater Sunrise.

The consequences

There are a number of potential consequences for Timor-Leste.

First, the revenues that flowed from the Joint Petroleum Development Area under the Timor Sea Treaty have provided approximately 90% of Timor-Leste’s state budget. The Bayu-Undan oil field is expected to be depleted by 2022 or 2023.

Without a source of revenue, Timor-Leste’s economy would be at serious risk of collapse: the A$16 billion petroleum fund could be depleted by 2025. The risk for Timor-Leste is that Australia will prolong boundary negotiations, putting more strain on its finances. Timor-Leste’s vulnerability increases as the window for resolving the dispute before oil revenues run out narrows.

Second, the Exclusive Economic Zone and continental shelf claims of Timor-Leste and Australia overlap with those of Indonesia. While the spectre of Indonesia’s future involvement in the dispute is largely ignored in the media, it would be naïve to believe that Indonesia would not become a third claimant if the opportunity arose.

The Conversation

Rebecca Strating, Lecturer in Politics, La Trobe University

This article was originally published on The Conversation. Read the original article.