At the time of writing this article, the parliaments of each State are yet to ratify the Treaty.2 Once in force, the Treaty will replace the 2002 Timor Sea Treaty3 and the 2003 International Unitisation Agreement for Greater Sunrise.4 The 2006 Treaty on Certain Maritime Arrangements in the Timor Sea (CMATS)5 was terminated on 10 January 2017 as part of the conciliation process.
KEY IMPLICATIONS OF THE TREATY
++ In essence, Australia has abandoned its historically expansive claims in the Timor Sea and settled those claims with Timor- Leste on more generally accepted bases of public international law. This is consistent with Australia’s strong foreign policy emphasis on maintaining the international rules-based order in the Asia Pacific in light of the potential for significant changes to that order with the re-emergence of China as the region’s dominant state actor.6
++ The focus now turns to the trilateral negotiations between the States and the Woodside-led Greater Sunrise Joint Venture (the Joint Venture)7 on the development of the Sunrise and Troubadour gas fields (Greater Sunrise) under the special regime established by the Treaty (the Special Regime). Striking a balance between commercially efficient development of Greater Sunrise, and the broader economic, political and strategic interests of Timor-Leste’s economic development, will be an important challenge going forward, with potential ramifications for the Australia-Timor-Leste relationship, energy security and the broader foreign policy posture of both States.
++ Timor-Leste will associate a significant strategic premium with any liquefied natural gas (LNG) project that it believes carries the potential to improve its economic independence. That is a strategic premium that is very likely not factored into more traditional ‘rational’ economic models (such as those traditionally favoured by Western project sponsors, investors and financiers). That premium also carries with it the potential to reduce or re-direct its reliance on foreign aid, particularly from Australia (along with the implicit political conditionality of foreign direct aid).8
++ The Government of Timor-Leste is likely to remain committed to Timor-LNG and its efforts to stimulate much needed economic development on its south coast. Projects like Timor.LNG often require ancillary infrastructure like roads, power stations, water and sewage systems. Economics permitting, this infrastructure may also be able to be deployed, at least to some extent, for the benefit of the immediate local area. Timor-Leste will be aware of these benefits. The risk for Australia is the extent to which those benefits may be able to be provided by non-Western state-backed rivals with a lower economic cost of capital or a higher strategic appetite for such investments. That is, if Australia insistently requires Greater Sunrise’s gas be processed at Darwin, it could sacrifice some of its broader strategic imperatives in East Timor.
++ More broadly still, Australia has long held the position that it is in Australia’s national security interests to remain part of the energy security equation in the Asia Pacific region.9 It is natural that Timor-Leste will adopt the same position for itself with respect to its own hydrocarbon resources. Tactically, as our region changes, Australia should be motivated to combine these two objectives as practicably and best it can.
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