In October 2019, the Democratic Republic of Timor-Leste launched its second international Licensing Round for oil and gas exploration, 13 years after the First Licensing Round. Seven of these blocks are located onshore and 11 are offshore in the recently awarded exclusive economic zone of Timor-Leste.
The licensing round follows the settling of a long-running maritime border dispute with Australia. Now,the two countries may are finally able to develop the Greater Sunrise gas field, comprised of the Sunrise and Troubadour gas and condensate fields, which hold around 5.13 tcf of natural gas and 225.9 million bbl of condensate respectively. This is very likely to lead to renewed interest in the Buffalo offshore oil field.
Under the agreement as it pertains to Greater Sunrise, Timor-Leste will be entitled to 80% of the revenue if gas is piped to Australia, or it will be split 70:30 if it is piped to Timor Leste. The two countries have agreed to develop this field together. The Buffalo field is to be transferred from the Australian exclusive economic zone (EEZ) to Timor-Leste’s EEZ.
Furthermore, speaking at the inaugural Timor-Leste Oil Gas & Energy Summit in Dili which launched the bid round, Prime Minister Matan Ruak pledged to energy investors that their investments will continue "without obstacles" with very few changes expected while active resources are transferred to Timor-Leste's EEZ.
He added, in remarks clearly aimed at his international audience, “You are the professionals… and you know the role that petroleum will continue to make in developing the quality of life in our new country. Timor-Leste has been blessed with significant reserves of petroleum, and the important part is they’re yet to be explored. The government commits completely to ensure that this opportunity here is a blessing, and will not turn into a curse.”
Timor-Leste is clearly on a mission to attract E&P players to exploit its reserves and makes no attempts to hide its ambitions to enter the oil and gas big time. Quite rightly so. In addition to being the fastest growing energy producer in SouthEast Asia, there are a multitude of bilateral or multinational partnerships available. With the maritime border settled, Timor-Leste has purchased ConocoPhillips’ 30% interest and Shell Australia’s 26.56% interest in the Greater Sunrise fields and the NOC, TIMOR-GAP is now the majority shareholder. Thanks to its international nature, the project will be developed jointly with Australia.
By agreeing to develop the field with Australia, under the terms of the Joint Development Area, the country has the ability to learn from a neighbour which has been involved in upstream exploration for decades, with all the established international norms and regulations that that brings. Investors should find comfort in this commitment by the Timorese. Notably, and in stark contrast to other countries benefiting from newfound oil wealth, the abovementioned Petroleum Fund will not be automatically granted to the government, since withdrawals require parliamentary approval.
Entering a burgeoning industry in any country is generally considered to be a shrewd investment. Entering a country’s burgeoning oil and gas sector at the right time could be considered the investment of a lifetime. So it is likely to prove in Timor-Leste. It may not be the beginning, as the country has seen production from the Bayu-Undan fields since the 1990s, but the industry is still very young and all layers of legislation and production sharing contracts are being laid out. The National Authority on Petroleum and Minerals (ANPM) has a dedicated team which is putting all systems in place to make the country’s energy sector as friendly and easy for investors as possible. Joao Afonso Fialho, partner at Portuguese law firm Vieira de Almeida, and energy law expert told IN-VR earlier in 2020 that “Timor-Leste is a rare, almost unique example of a young country with good governance, doing things by the book. Even when they make mistakes – an unavoidable reality for all countries - it is because they are very compliance-oriented in their approach.”
Timor-Leste’s public sector is prepared to understand investors’ needs and tries as much as possible to assist them to overcome any obstacles, within reason. This would also tend to help newcomers and independents into the upstream sector; those who can adapt and modify their companies around the opportunitiess of Timor Leste.
What developing countries need from international companies are bespoke solutions to their issues. Foreign companies may have models and best practices that they can replicate across their businesses, but those who can adapt and make the most out ofTimor-Leste’s opportunities will be the biggest winners. Those entrepreneurs who make hay in Timor-Leste will build a reputation in the region, Australia and across Asia.
