Onshore potential the trick for East Timor

EAST Timor President Jose Ramos-Horta should know about the onshore oil and gas potential of his fledgling nation. After all, his eldest brother was known as the “oil man” in the area where he grew up.By Paul Garvey in Hong Kong
Onshore potential the trick for East Timor Onshore potential the trick for East Timor Onshore potential the trick for East Timor Onshore potential the trick for East Timor Onshore potential the trick for East Timor

"He had three wells that he dug himself, they were just like water [wells] but instead of water he pulled up oil," Ramos-Horta told reporters at the CLSA Investors' Forum in Hong Kong last week.

"He refined it himself in a very dangerous way, and then he sold it locally," he said.

Ramos-Horta related the story from his childhood when asked about the onshore potential of East Timor.

The country is best known in the oil and gas community for its at-times controversial rights over the Joint Petroleum Development Area, which sits between Australia and East Timor and is jointly administered by the pair.

The Bayu Undan gas field falls in the area, and has been a major source of income for East Timor.

More controversial has been East Timor's manoeuvring over the Greater Sunrise gas field, a small portion of which falls within the JPDA.

East Timor is unhappy with the selection by the project partners - operator Woodside Petroleum, Royal Dutch Shell and ConocoPhillips - of floating LNG for the project's development, with East Timor opposed to any plan that doesn't incorporate an onshore LNG plant on its own soil.

More clear-cut from a legislative and development point of view should be East Timor's own onshore and offshore areas.

Given the petroleum riches of other nations along the archipelago, East Timor should offer strong exploration potential in its own right.

According to Ramos-Horta, the prospects are there.

"For many, many years, going back to the Japanese occupation of Timor Leste, there were known to be oil and gas onshore. You can see seeps of oil and gas coming out of the ground in many parts to Timor Leste," he said.

"[But] we don't yet have any studies on the commercial viability."

So far, he says, there are legal impediments to getting onshore oil and gas exploration underway.

A number of Chinese oil and gas companies have already signalled their interest in following up some of the onshore prospects, and Ramos-Horta said the government was working to establish the appropriate legislation to administer onshore exploration.

"A Chinese company did a seismic survey [of onshore prospects] in 2004-05, it wasn't followed up," he said.

"China is interested in onshore, but we don't yet have the law - it should be ready this year or next - on onshore explorations."

Exploration work is more advanced in East Timor's own waters.

Italian oil and gas giant Eni has five blocks to its name in East Timor, and is expected to start production from a "modest"-sized field later this year, while Malaysia's Petronas is also active in the waters.

One gets the impression that East Timor is happy to take its time with the development of its resources.

Royalties and taxes from Bayu Undan have helped make East Timor one of the world's fastest growing economies, and the country would appear to have ample revenues to cover its spending and development needs.

That helps explain the reason it continues to play hardball on Greater Sunrise.

Despite saying new Woodside chief Peter Coleman had left a positive impression on Dr Ramos-Horta's parliamentary colleagues, he said East Timor's concerns around the FLNG plans remained.

"We have done other studies that show a pipeline to Timor Leste is both technically and financially viable, and much cheaper than the consortium alleges," he said.

"They believe the pipeline, with all the associated infrastructure that's needed, would cost about $US18 billion. Our own studies, backed up by the experience of Indonesia and Qatar, show that it would actually cost around $13 billion.

"That would be only slightly more than FLNG, which according to the consortia costs $12 billion."

Given the technical risks surrounding the FLNG technology, Dr Ramos-Horta believes the cost difference is worth it.

Of course, there's little incentive for Woodside and its partners to pursue a riskier technology that will deliver at best only a narrow cost advantage. The partners know a little bit about LNG developments so their cost forecasts are likely to have some credibility.

But with East Timor enjoying plenty of revenues already, the country appears to have time on its side - particularly if it can turn some of that onshore potential into reality.

First published in EnergyNewsBulletin.net.

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