English | 中文版 |  Русский

Breaking News:

Source: www.asiaecon.org |

TIMOR LESTE HOPES TO ENTER LNG MARKET


Timor Leste is optimistic that a LNG plant worth up to $10 billion could be located in the tiny nation, based on the early findings of a new technical study. Timor Leste, regarded as Asia's poorest country, has been hoping to become a LNG exporter for many years to boost its economy and the possibility is now closer than ever.



Timor Leste is optimistic that a LNG plant worth up to $10 billion could be located in the tiny nation, based on the early findings of a new technical study. Timor Leste, regarded as Asia’s poorest country, has been hoping to become a LNG exporter for many years to boost its economy and the possibility is now closer than ever.

The majority of Timor Leste’s infrastructure was destroyed during a power struggle in 1999. Approximately 70 percent was destroyed by Indonesian troops and anti-independence militia, but Timor Leste finally obtained independence in 2002. An international program led by the United Nations rebuilt its infrastructure, but Timor Leste still remains one of the poorest countries in the world. The Human Development Index, which takes into account factors such as life expectancy, literacy, education and GDP per capita, ranks Timor Leste at 158th in the world and the lowest in Asia.

As Timor Leste moves further away from the struggle with Indonesia, international aid inflows have declined leading to dwindling economic output. However, the potential for LNG in the country provides hope that it will be able to improve its economic situation in the near term.

The potential for LNG around Timor Leste has been debated since the 1970s when the then Portuguese colonial administration granted concessions to the Oceanic Exploration Corporation to develop the deposits. The project was derailed by the Indonesian invasion in 1976 and nothing happened until the Timor Gap Treaty of 1989. The treaty established guidelines for joint exploration and split ownership between Australia and Indonesian controlled Timor Leste. In 1993, Woodside Petroleum, Australia’s second largest energy producer, and ConocoPhillips, the fifth largest energy company in the world, began development of the resources but no infrastructure of LNG was every produced.

When Timor Leste gained independence in 2002, a Joint Petroleum Development Area was defined and East Timor was awarded 90 percent of the revenues from existing projects and control of the Greater Sunrise Gas Field. Disputes between Australia and Timor Leste over revenue sharing over the oil field have been battled back and forth ever since. It is this field that Timor Leste has been trying exploit in order to enter the widely profitable energy market.

One attempt to develop the the field was rejected last year by Woodside Petroleum. The company ruled out building a plant in Timor Leste to process the gas because it believed building a pipeline would be too risky and expensive to build.

The most recent study shows more promise but is still in the early stages. Petronas, the Indonesian state-owned oil firm, has been in serious discussions about the new study and the possibility of building a plant on Timorean soil. Energy Minister Alfredo Pires estimated that the LNG plant could cost between $8 and $10 billion.  A South Korean consortium has been already lined up to buy the gas.

The same reasons that Woodside pulled out of the deal for are still in question. Woodside stated that building the LNG plant in Timor Leste would require building a 184 kilometer pipeline that would cross a 3 kilometer deep trench. The depth of the sea trench is the main problem, but a proposed floating LNG project may be the solution.

Due to the dire economic state in Timor Leste, a lot is riding on the development of the Sunrise Gas Field. The estimated $8 billion in foreign investment to build a LNG plant alone would be a major boost to the small nation whose annual GDP is only $459 million. Whether or not a deal ever falls in place relies heavily on more feasibility studies, the relationship with Australia and the rising price of LNG.

Source: www.AsiaEcon.org
Please send comments and constructive suggestions to feedback@AsiaEcon.org

Source: www.asiaecon.org |


More Special Articles - Asia Business & Economy Articles