Conoco Timor - A battle in East Timor

June 26, 2003

By Eric Ellis

East Timor, a nation that depends on foreign aid to fill its coffers, is about to become a country that relies on one company to fuel its economy: ConocoPhillips.

A year after East Timor won independence from Indonesia, the Houston-based oil giant has finally been cleared to pump gas from the Timor Sea.

The company has already invested $2 billion tooling up to pipe gas from the Bayu-Undan fields to Australia. But it couldn't start pumping until Australia and East Timor came to terms on how to divide the spoils. "We were pretty much ready to go a year ago," says Blair Murphy, manager of the $5 billion Bayu-Undan project. "The past year has had its issues."

Royalties from the Bayu-Undan fields should double East Timor's $80-million-a-year budget, now funded almost entirely through foreign aid. Over the long term that figure could reach a total of $3 billion—a boon for one of Asia's poorest countries.

Ownership of the nearby Greater Sunrise fields, however, whose reserves could be three times larger, is still up for grabs. Australia says it has rights to more than 80% of the area; East Timor says it owns all of it.

Both sides are seething. Dili accuses Canberra of neocolonial bullying; Canberra is not complimentary either.

Given the bad blood, the issue is unlikely to be settled soon. "What we think is our sovereign right," Prime Minister Mari Alkatiri says, "we will never give up."