East Timor wants more than oil: it wants an oil industry

12 December 2005

Díli, East Timor, 12 Dec – The agreement East Timor has signed with Australia will only be fair if the facilities for processing the gas extracted from the Bayu-Undan field are kept in East Timor, Prime Minister Mari Alkatiri has told Portuguese daily newspaper Público.

“We regard the agreement,” with Australia, concluded in November and scheduled to be signed in January, “within a package that includes the gas pipeline for East Timor and gas processing in our country. And Australia and the companies involved know that,” Alkatiri said.

“The equity of the agreement,” he said, “is directly and inexorably linked to the construction of the gas pipeline and the gas processing plant.”

“It doesn’t seem reasonable that the oil resources in the Timor Sea should only be a source of economic development exactly for the country that is already most developed. It would be a way of denying our people of the resources to which they have a right, or rather a new form of exploitation,” Alkatiri is quoted as saying in an article entitled, “Developing East Timor on the Basis of Oil Resources.”

The agreement between Australia and Timor, which is due to be signed in mid January, outlines that East Timor will receive 50 percent of the revenues from the Joint Oil Development Area, where the Bayu-undan deposit is located, and half the revenue from the Greater Sunrise field, to the east.

The Timor authorities expect that the Greater Sunrise field will come into production in the middle of the cycle of Bayu-Undan field, ensuring continuity of revenue for the Timor Oil Fund for around 30 years.

But, Alkatiri said, the creation of gas processing facilities in his country would be an important step in creating an oil industry, which is in itself an important factor for development.

“There is another issue alongside our focus on development of the oil sector: the diversification of the economy through balanced multi-sector development to promote a wider involvement in the economic dynamics of the region,” Alkatiri said in the report.

The prime minister particularly pointed to the contribution the oil industry could bring to training human resources, and the development of sectors such as construction, hotels, restaurants, transport and information technology.

It would also make it possible for public sanitation, road network, electricity distribution, port and health infrastructures to be built, he said.

According to official figures, the Timorese economy should grow 2.5 percent this year, almost double the growth registered in 2004, particularly due to the increase in the Oil GDP.

Oil revenue, the figures show, should increase almost six-fold this year, to almost US$244 million, and in the medium term is expected to remain at this level.

After two years of recession, the non-oil GDP for East Timor increased last year, and is forecast to increase by close to 3 percent in 2005, according to the International Monetary Fund (IMF).

In the Publico report, Alkatiri said that in order to make the most of the flow of oil revenue, Timor would also have to do “homework.”

“We have to ensure the stability of the macro-economy, a solid fiscal policy and create savings, in order that we can ensure gradual development of public expenditure and reach a sustained and sustainable level of growth,” he said.

Alkatiri’s concern with public expenditure, as well as with inflation, is necessary because, “the price of oil on international markets could fall dramatically, or be highly volatile in this period,” he said.

As well as this, he added, the country needs to, “ensure that only investments that provide a rational and balanced social and economic return are approved and that those projects are supervised in the strictest way possible.”

“It was with this in mind that we created the Oil Fund. It is based upon it, on the concept of maximizing oil revenue, and institutional efforts in East Timor, that we aim to meet the challenge of our social and economic development,” Alkatiri said. (macauhub)