In a move that will bring disputed offshore oil and gas to its coast rather than to Australia, East Timor's government has designated land to be developed into a regional petrochemicals hub. Three towns in the southern part of the island have been designated to build a petrochemical processing plant, liquid natural gas facility and supply center.
The neighbors share proceeds from the Bayu Undan field in the Timor Sea, but there is disagreement about a larger, untapped field called Greater Sunrise, which contains an estimated 240 million barrels of light oil and 5.4 trillion cubic feet (154 billion cubic meters) of natural gas. It is worth billions of dollars in commercial oil and gas sales and the country that hosts the processing facilities will also generate billions in tax revenue.
The unwavering position of East Timor's leaders could set the stage for a standoff with a group of oil and gas companies led by Australia's Woodside and even block short-term development. Woodside said in its latest annual report a deal is expected by the end of 2009. Woodside and its partners are licensed to develop Greater Sunrise and want to build a 330 mile (530 km) pipeline running south to Darwin, where ConocoPhillips has built a US$5 bln natural gas processing plant, or to a floating gas processing facility. The group argues that technical studies concluded processing the resources in Australia is more commercially viable. Under a current agreement, neither party can develop Greater Sunrise unilaterally.
East Timor has around US$5 bln in a petroleum fund that can be used to build infrastructure such as roads, ports and a power plant. But it is seeking outside funding of up to US$10 bln to create the petrochemicals industry.