Timor-Leste is one of world's most natural resource-dependent countries. In 2009, government petroleum revenues accounted for 75% of GDP. For 2011, 89% of the government budget is expected to derive directly from petroleum revenues.
In 2009, Timor-Leste ranked 53rd in world oil production, generating approximately 100,000 barrels per day. Its proven oil and natural gas reserves (553.8 million bbl of oil and 7.1 trillion cubic feet of gas) place it in the same category as Uzbekistan, Bolivia, and Trinidad and Tobago. Given its population of just under 1.2 million people, Timor-Leste's untapped petroleum wealth equals approximately US $36,920 per citizen (based on proven reserves and an assumed oil price of $80/barrel). In contrast, Timor-Leste's non-oil nominal per capita GDP is $391 per year.
Petroleum, Natural Gas and Minerals
Hydrocarbon exploration and production has been ongoing since oil and gas were first discovered in 1893 in what is now western Timor-Leste. Although exploration took off in the 1950s-1970s, none of the on-shore finds during this period proved to be of commercial interest. It was not until the early 1970s that surveyors began predicting significant offshore reserves in the Timor Sea, between the island of Timor and Australia. Though Timor-Leste also has significant untapped mineral potential in copper, gold, silver and chromite,1 the mountainous terrain, poor infrastructure, and perceived political uncertainty have impeded widespread exploration and development.
The oil and gas discoveries at Elang-Kakatua in 1994 launched Timor-Leste's large-scale offshore oil industry. Production at Elang-Kakatua began in 1998, followed by Bayu-Undan (2004) and the much smaller Kitan (expected for 2011). The enormous Bayu-Undan discovery has an estimated 3.4 trillion cubic feet of gas and 400 million barrels of oil. The Greater Sunrise discovery (1974) includes a super-giant gas field, with estimated reserves totaling 8 trillion cubic feet of gas and 290 million barrels of oil. Despite these large reserves, the region remains under-explored and considerable offshore potential remains.2
The Bayu-Undan field is currently operated by majority shareholder Conoco-Phillips, in partnership with ENI, Santos, INPEX and the Tokyo Electric and Gas Company. The Greater Sunrise field is operated by minority shareholder Woodside, in partnership with Conoco-Phillips, Shell, and Osaka Gas.
Production at Greater Sunrise has been delayed as a result of disputes over the maritime boundary with Australia and over the location of the LNG plant that will process the natural gas produced. In 2007, Timor-Leste and Australia ratified an agreement to split Greater Sunrise upstream revenues 50/50. The deal also required that Timor-Leste to surrender its claim to some disputed territory. While the agreement ensured that production could go ahead, the official maritime boundary between the countries is still under dispute.
In the partners' argument over plant location, Shell favors a floating plant, which would be one of the first of its kind, while Woodside and Conoco-Phillips favor expanding an LNG plant in Darwin, Australia. However, Woodside has not rejected Shell's preferred plan. The Timor-Leste government, meanwhile, would like to build the plant in Timor and pipe natural gas to the southern coast.
The Government of Timor-Leste is also seeking to create a National Oil Company, Petronatil, which would be able to enter into joint ventures in the event of new discoveries. Officials circulated draft NOC legislation in January 2011.
1 United Nations, Atlas of Mineral Resources of the Escap Region: Geology and Mineral Resources of Timor-Leste, http://www.unescap.org/esd/publications/AMRS17.pdf, 2003.
2 ibid
