Dave Tollner (Solomon, Country Liberal Party) Share this | Hansard source

Mr Deputy Speaker Secker, how glad I am to see that you are in the chair today. The purpose of the Offshore Petroleum Amendment (Greater Sunrise) Bill 2007 is to incorporate into the Offshore Petroleum Act 2006 the Greater Sunrise unitisation agreement, which gives effect to the Agreement between the Government of Australia and the Government of the Democratic Republic of Timor-Leste relating to the Unitisation of the Sunrise and Troubadour Fields. The agreement was signed by Australia and Timor-Leste in Dili on 6 March 2003. I was very fortunate to have been able to accompany the Minister for Foreign Affairs to that significant treaty signing. It was a memorable occasion for me, particularly being from the electorate of Solomon, so close to East Timor.

The agreement provides the framework for the development and commercialisation of the petroleum resources in the Sunrise and Troubadour fields, which are collectively known as Greater Sunrise. This resource straddles the border between the Joint Petroleum Development Area—which is the area of shared jurisdiction between Australia and East Timor established by the Timor Sea Treaty—and an area of Australian jurisdiction. The bill will allow for the development of the Greater Sunrise petroleum resource for the joint benefit of Australia and East Timor. The Timor Sea has emerged as one of the world’s great gas provinces and is the nation’s best option for future production of natural gas. Part of the Timor Sea is subject to overlapping territorial claims by Australia and Timor-Leste. This area contains extensive resources of oil and gas and two major petroleum development projects are underway or proposed: the Bayu-Undan field and the proposed Greater Sunrise field.

Around 88 per cent of this nation’s gas reserves are located off the coast of the Northern Territory and northern Western Australia. The Timor Sea reserves are sufficient to provide the nation with 400 petajoules of gas—energy every year for 50 years—which is almost 50 per cent of all Australia’s current gas consumption and 10 per cent of the nation’s total current energy use from all sources. Greater Sunrise is a world-class resource estimated to contain some eight trillion cubic feet of natural gas and 295 million barrels of condensate. Development of the Greater Sunrise field has the potential to deliver significant benefits to both Australia and Timor-Leste. The benefits include investment and employment as well as plenty of export revenue for both countries. Should commercialisation proceed, Darwin’s proximity and size should ensure that it becomes heavily involved in the project. Accordingly, Darwin and the Northern Territory generally will benefit significantly from this major boost to economic activity in our region.

The Bayu-Undan field is operated by ConocoPhillips Australia and has recoverable reserves of more than 3.4 trillion cubic feet of natural gas and approximately 400 barrels of liquid hydrocarbons. Stage one of the Bayu-Undan development—the liquids stripping phase—became operational in March 2004. The second stage—gas development, which included the construction of a $750 million 500-kilometre underwater pipeline from Bayu-Undan to an LNG plant near Darwin—was completed in 2005.

In February 2006 the first shipment of liquid natural gas left Darwin from the newly commissioned $1.75 billion 3.24 million tonnes per annum LNG plant in Darwin harbour. LNG is sold from this plant to the Japanese energy companies under a 17-year contract. The plant is geared for new gas developments in the Timor Sea, with approval for expansion of up to 10 million tonnes per annum of LNG production. Needless to say, this development in the Darwin harbour has spurred economic activity and created jobs. There was a boom in the construction industry when Bechtel and ConocoPhillips Australia were constructing the plant. We now have the foundation stone for a real gas hub to occur in Darwin. There are plans to develop the Blacktip field in the Southern Bonaparte Basin to supply the Northern Territory’s own energy needs for the long term.

A gas sales agreement has been signed between the Northern Territory’s Power and Water Corporation and energy developer ENI Australia to meet the Northern Territory’s electricity needs for the next 25 years. The agreement will see Power and Water purchase around 750 petajoules of gas which will be used to run power stations in all regional centres from Alice Springs to Darwin. A separate gas transportation agreement between Power and Water and the Australian Pipeline Trust will lead to the construction of the 275-kilometre Bonaparte gas pipeline, linking the gas processing plant at Wadeye to the existing Amadeus Basin to Darwin gas pipeline.

The development of Greater Sunrise will also stimulate more investment in petroleum exploration and development in the Timor Sea, which will be in the interests of Australia and in particular of East Timor. On that basis, it is estimated to provide Australia with about $10 billion in upstream revenue over the life of the field. This resource is shared between Australia and East Timor under the Timor Sea Treaty on the basis of 79.9 per cent to Australia and 20.1 per cent to East Timor. The apportionment ratio can be changed in the future if the countries agree to a redetermination based on newer geological or geophysical data.

The Timor Sea gas reserves have been known about for about 30 years but difficulties have slowed development in the area. The fluctuating world market, international negotiations, East Timor’s independence, corporate rivalry and up-front costs are just a few problem areas I could name. Currently the joint venturers have indicated that they will consider re-evaluating the project once a framework of legal and fiscal certainty is in place. To win overseas gas contracts, however, the joint venturers need to be very confident about the regulatory regime which will apply over the resource. Implementing the unitisation agreement through this bill will bring them a lot closer to that position.

I note that the talk is all about exporting this gas overseas. I would also like to see some thought given to supplying Australia domestically with this gas. There is quite a large resource there. It is mainly in Australian waters and it could well be utilised in the future for our own domestic needs.

The Greater Sunrise unitisation agreement includes an article to the effect that the contents of the agreement cannot be used in any way to prejudice either of the countries’ maritime boundaries. The bill puts into place the administrative arrangements for the unit development of the Greater Sunrise petroleum resource. In practice this means that Australian regulators and regulators of the Joint Petroleum Development Area will be able jointly to ensure that the administration of the Greater Sunrise operations is coordinated and that recovery operations are conducted in accordance with good oilfield practice. The administrative arrangements will mirror those that apply elsewhere under Australian regulatory control. The main objective of the unitisation agreement is to enable the resource to be developed as a single unit. Without unitisation, resource extraction may be inefficient and inequitable. The bill facilitates a single regulatory regime for the development of the petroleum resource but also allows both jurisdictions to separately administer certain aspects of their respective taxes.

The agreement includes a mechanism for adjusting the initial petroleum production apportionment between the Joint Petroleum Development Area and Australia if new geological evidence indicates that a revision is needed. For the purposes of taxation, the component of the petroleum production from Greater Sunrise attributed to the Joint Petroleum Development Area will be taxed in accordance with the arrangements under the Timor Sea Treaty, whereby Timor-Leste has title to 90 per cent of production and Australia has title to 10 per cent. The part of production from the Greater Sunrise attributed to Australia will be taxed in accordance with Australia’s domestic taxation arrangements.

The Greater Sunrise unitisation agreement, which was concluded in March 2003 and which I observed, will be replaced by provisions of the new Treaty between the Government of Australia and the Government of the Democratic Republic of Timor-Leste on Certain Maritime Arrangements in the Timor Sea when it is ratified by Timor-Leste. The treaty on certain maritime arrangements in the Timor Sea, which was signed on 12 January 2006, will set maritime boundary claims between the two nations for 50 years and will lift Timor-Leste’s share of the Greater Sunrise revenues from 18 per cent to 50 per cent. Timor-Leste will shortly be ready to bring these treaties into force.

I will repeat that: Timor-Leste will have 50 per cent of the royalties originating from the Greater Sunrise fields. This is significantly more than was originally bargained for and negotiated, whereby Timor-Leste had 90 per cent of the royalties in the Joint Petroleum Development Area which was, as you may recall, 20.1 per cent of the total Greater Sunrise field, and Australia had royalties from the other 80 per cent of that field. In this case now, Timor-Leste is getting 50 per cent of the total royalties of the whole field. This is a significant move.

I think it is a very generous move by the Australian government to provide Timor-Leste with an income that will allow it to develop an economy based on the recovery of gas in the Timor Sea. There are several billion dollars in revenues expected to be generated from this field for Timor-Leste and it should never be underestimated what these royalties will do for the Timor-Leste economy. The significant role and the generosity of the Australian government in pulling this deal together should never be forgotten. Obviously, from an Australian government point of view, we also will do very well out of this deal and seeing the exploitation of these resources. From a particularly local point of view and as somebody from Darwin, it also, of course, means more development and jobs for the people of Darwin as this field is put into production, hopefully not in the long term.

Gas is a global business and the Timor Sea holds a window of opportunity that now beckons. It is in Australia’s national interest and, as I said, in Timor-Leste’s national interest that this bill be passed. I am very glad to be here today to support this bill. I have taken a great interest in developments in the Timor Sea over quite some years now and Greater Sunrise has been an issue for Northern Territorians for a long time. We have wanted to see this field developed and have production occur in Darwin. To see that this is now passing through the parliament with the support from the other side heartens me. We are now one step closer to seeing the fruit of all of those efforts on this development which has taken so many years to bring about. I support this bill and I recommend that the House support the bill as well.

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