Dili knocks back Sunrise plan

Timor Leste has rejected Woodside Petroleum's development proposal for the A$6.6 billion (US$6.1 billion) Greater Sunrise gas field, a spokesman for the Dili government said today.

Agio Pereira told Reuters the move was prompted by doubts about the commercial viability of Woodside's proposal to pipe gas from the field to either Darwin or to a floating liquefied natural gas plant.

Woodside had hoped to sanction the project next year, but Dili's decision may have effectively stymied the operator's hopes of bringing Sunrise on stream quickly.

Timor Leste said its decision was prompted by growing concerns after results from various feasibility studies commissioned by the government revealed conflicting conclusions to Woodside's original assertions.

"The Timor-Leste pipeline option had been eliminated unilaterally by Woodside without proper due assessment," the government said.

A Woodside spokeswoman declined to comment.

The Australian giant later issued a statement, saying: "Under the international unitisation agreement, the governments of Australia and Timor Leste and the Sunrise joint venture participants are required to develop the reservoir to the best commercial advantage.

"Following selection of the preferred concept, Woodside will work with the Timor Leste and Australian governments to secure the timely approval of a field development plan to develop Sunrise."

Any development of the Sunrise gas field, estimated to hold 5.13 trillion cubic feet of gas and 226 million barrels of condensate, must be approved by both the Australian and Timorese governments, according to the Certain Maritime Arrangements in the Timor Sea (CMATS) treaty signed in 2007.

Sunrise lies partly within the Joint Petroleum Development Area (JPDA) between Australia and Timor Leste, while the remainder straddles the two countries' territorial waters.

Insiders have voiced fears Dili's decision could possibly derail a 2006 treaty between Australia and Timor Leste setting up the JPDA.

The treaty involved setting aside Timor Sea maritime boundary claims for 50 years and increased Timor Leste's share of Sunrise revenues to 50% from the 18% slice set under a 2003 agreement.

Woodside shelved the greater Sunrise project in 2005 and has for the past few years described it as not being a top priority.

However, last month Woodside said it was targeting a final investment decision by the end of this year. At the same time, it ruled out building a liquefied natural gas plant in Timor Leste.

Central to the dispute with Dili has been the development concept.

Woodside has said that if it opts to pipe the gas to shore for processing, the plant would be at Darwin. However, the Timor Leste government wants the plant built on its shores.

Hartleys oil and gas analyst David Wall told the Australian Associated Press Dili's decision could see negotiations between Woodside and East Timor being dragged out even further.

Wall said Woodside had previously resisted laying a pipeline to Timor Leste, saying that trenching the ocean floor between Sunrise and the island was simply too costly.

"[The development solution] will probably be floating LNG," Wall told AAP.

He added: "It's a disagreement on tax, really. The Timorese need the tax dollars."

Meanwhile, Australia's federal Resources Minister Martin Ferguson stood by CMATS treaty governing the fields in the JPDA.

He told Australian media that the Woodside-led joint venture headed by Woodside had yet to formally present its preferred development model.

"The Australian government remains committed to the treaty and the process it provides for handling any development proposal from the joint venture," Ferguson said.

The CMATS treaty gives Australia and Timor Leste until 2013 to strike a deal. Pereira later told AAP the Timorese government would continue to "act in good faith".

The latest of three treaties on the Timor Sea was signed with Australia in 2007.

CMATS stated that revenue from Greater Sunrise would be split equally. However, the deal will be "terminated" if a joint development plan is not agreed upon within seven years of 2007 or if production does not start within 10 years of CMATS' ratification.

Woodside has a 33% stake in Sunrise, while ConocoPhillips has 30%. Shell has 27% and Osaka Gas 10%.

Dili yet to award Sunrise development job

The government of Timor Leste said today that it still has not awarded a contract to any company to develop a pipeline or LNG facility from its lucrative Greater Sunrise gas field.

Australian energy company Woodside Petroleum holds the exploration and exploitation rights of the Greater Sunrise field but the government said in January that it would not approve Woodside's development plan unless it also built an onshore plant to liquefy gas.

The Australian operator plans to either send gas by pipeline to Darwin for liquefaction or exploit it using a floating liquefied natural gas vessel.

Timor-Leste has long argued that Sunrise gas be exploited via a liquefaction plant on its south coast — a proposal rejected by Woodside and its partners.

Reports in January claimed that the government was considering approaching Malaysian state oil company Petronas instead.

However, Dili said in a statement today that it had not entered into a contract with Petronas to replace Woodside as the upstream developer of the site.

The statement also said that neither Petronas nor Woodside nor any other company had been selected as the downstream developer.

"It is also important to note that the Government of Timor-Leste has not given any downstream contracts for the Greater Sunrise project to any company including Woodside. The downstream segment will include the contract for transportation (the pipeline) and processing (the LNG-Plant)," it said.