The government of East Timor has moved to a majority interest in the Greater Sunrise natural gas fields with the acquisition of Royal Dutch Shell PLC’s 26.6% stake for $300 million.
The acquisition follows the government’s purchase of ConocoPhillips’s 30% stake in the fields for $350 million early in October and now brings East Timor’s total holding to 56.56% (OGJ Online, Oct. 1, 2018).
Woodside Petroleum Ltd. remains operator with 33.4%. The remaining 10% is held by Osaka Gas.
Shell Australia Chair Zoe Yujnovich announced the sale of her company’s interest, saying the two parties had different opinions on how to develop the field.
“Although we formed different views about the optimum development scenario, we understand and respect the Timor-Leste government’s determination to develop the Sunrise fields through an onshore LNG facility on its south coast,” she said. “We wish it well in pursuing its aspirations to develop this important resource for the nation.”
Yujnovich added that the sale aligns with Shell’s global strategy to reshape the company into a simpler and more resilient entity.
Xanana Gusmao, special East Timor representative and former president, said his country appreciated Shell’s willingness to sell its interests in the Greater Sunrise project.
“Shell’s attitude throughout the negotiations shows that it is ready to consider not only its commercial interests, but also those of small nations,” he said.
Both the ConocoPhillips and Shell deals are subject to approval from the East Timor Parliament and the circumstance that the remaining partners Woodside and Osaka Gas do not exercise preemptive rights.
Woodside and its former partners have consistently resisted East Timor’s calls for development of Greater Sunrise via a pipeline to an LNG plant on the country’s south coast, preferring a plant to be in Darwin on Australia’s north coast.
Woodside said Nov. 26 that it remains committed to developing the project. Chief Executive Officer Peter Coleman has already hinted at a potential compromise when he was reported as saying last month that the company would consider investing in the offshore production of gas from Greater Sunrise, but not the riskier pipeline or LNG plant.
This has been taken to imply that Woodside could sell its share of the gas to East Timor at the pipeline inlet valve.
Analysts are undecided about the prospect of Greater Sunrise being developed within the next decade because there still needs to be negotiation of fiscal terms and tolling agreements. However, if East Timor was to sell down its interest and bring in other parties, such as the Chinese and Koreans, there might be a swifter move towards development.
The Greater Sunrise gas project involves development of Sunrise and Troubadour gas fields discovered by the Woodside-led joint venture in 1974. They are estimated to hold a total of 5 tcf of gas and 226 million bbl of condensate.
Because the fields were remote gas finds, they were not deemed commercial in the 1970s. They have been subsequently tied up in international boundary disputes that have prevented development.
The fields lie opposite East Timor in a gap in the maritime boundary set between Australia and Indonesia in 1972. East Timor at that time was a Portuguese colony and the Portuguese government in Lisbon did not agree to a continuation of the boundary across its jurisdiction. It wanted a median line between it and Australia, hence the gap was created.
However, when Indonesia annexed East Timor in 1975, Australia claimed the 1972 agreement with Indonesia should hold across the gap, which would put the Sunrise and Troubadour fields in Australian territory.
By that time Indonesia had realized the 1972 agreement with Australia was not to its advantage and it held out for an agreement that revenues from subseabed resources would be shared in this gap region, an arrangement that was eventually sanctioned by both countries in 1989 with creation of the Zone of Cooperation.
A similar arrangement was agreed between Australia and East Timor in 2002 following East Timor’s independence from Indonesia in 1999. However, when appraisal of the Greater Sunrise fields indicated the extent of the gas deposits, East Timor agitated for a scrapping of the Zone of Cooperation in favor of a median line between it and Australia. A median line maritime boundary placed most of the Greater Sunrise fields on East Timor’s side.
The dispute was finally settled earlier this year with the agreement of a median line boundary between the two countries. It was also agreed that revenue from Greater Sunrise production will be split 80%-20% in favor of East Timor if gas is piped to Australia for processing or 70%-30% if it is piped to East Timor.