East Timor's newly re-elected Prime Minister has shown no sign of backing down in the stalemate over Woodside Petroleum's Sunrise LNG project in the Timor Sea. He has insisted that the gas must be piped ashore for processing rather than in a $US13.5 billion floating plant.
Xanana Gusmao's comments, his first on Sunrise since the July 9 parliamentary elections, underline the huge challenge for Woodside, the East Timorese and Australian governments to reach an agreement on the stalled project before a crucial February 2013 deadline.
In his address during the swearing-in of the new government in Dili on Wednesday, Mr Gusmao said the development of an oil and gas sector on the south coast "will remain a priority".
"The government is committed to bringing the pipeline from the Greater Sunrise field to the south coast of Timor-Leste," he said.
"Let's prove to the world that a pipeline to Timor-Leste is a safe and economically viable solution and that our horizon is the development of a petroleum industry able to provide direct economic dividends for our population."
The Sunrise venture, which includes Shell and ConocoPhillips, wants to develop the 5.1 trillion cubic feet gas resource using a floating liquefied natural gas project, but East Timor has long favoured onshore processing on its soil to help with national development and employment.
Negotiations over the project between Woodside and the government broke down under former Woodside chief executive Don Voelte. His successor Peter Coleman has been working on re-establishing relations to pave the way toward an accord.
An agreement on how to develop the field needs to be reached between the venture partners and the Australian and East Timor governments by February 2013 to avoid the potential expiry of a bilateral treaty on the field, which straddles an area that is jointly administered by the two nations.
Should that so-called CMATS treaty lapse, it would open the way for East Timor to resume its Timor Sea maritime border claims, throwing into doubt not only Sunrise but other projects in the area, including ConocoPhillips' Bayu-Undan gas venture and ENI's $US1 billion Kitan oil project.
Woodside said recently that all Sunrise stakeholders, including both governments, were aligned in wanting to see the resource developed. Japanese utility and LNG buyer Osaka Gas also has a stake in the project.
Some observers have suggested the East Timor government may be willing to compromise and accept a floating plant in return for support by the venture to develop gas-based energy infrastructure in East Timor and a petroleum supply base.
But Mr Gusmao's comments signal that any such compromise, if it can be reached, is a long way off.
Woodside has argued that building an LNG plant in East Timor would add $US5 billion to costs because of the technical complexity of building a pipeline across the deep Timor Trench and the lack of skilled labour and infrastructure in East Timor.
The East Timor government, on the other hand, objects to a floating LNG plant, saying the technology is still unproven and too risky.
Woodside has dropped any timetable for developing Sunrise, but Citigroup energy analyst Mark Greenwood has said the earliest the project would go ahead is late 2014, with start-up in 2020.
Key points Woodside Petroleum's plan to build a floating LNG plant in the Timor Sea is in doubt. East Timorese Prime Minister Xanana Gusmao insists the plant be built on shore. Woodside says that would add $5bn to the plan.
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