epa06585998 East Timor's veterans and youth hold banners as reactions to the agreement to end the maritime dispute between the East Timor and Australia, during a march in Dili, East Timor, malso known as Timor-Leste, 07 March 2018. According to media reports, East Timor and Australia signed a treaty granting East Timor up to 80 percent of the revenue from the oil and gas reserves in the Timor Sea. EPA-EFE/ANTONIO DASIPARU
Dili locals held a rally after news of the agreement to end the maritime dispute between East Timor and Australia © EPA

Australia and East Timor have signed a treaty redrawing their maritime boundary, ending a decade-long dispute between the countries and unlocking tens of billions of dollars in oil and gas reserves in the Timor Sea.

The treaty signing in New York marked the first conciliation under the UN Convention on the Law of the Sea — a process officials hope could offer other countries a path towards resolving contentious maritime boundary disputes.

“The treaty is a historic agreement that opens a new chapter in our bilateral relationship,” said Julie Bishop, Australia’s foreign minister. “It establishes permanent maritime boundaries between our countries and provides for the joint development and management of the Greater Sunrise gasfields.”

The deal is a coup for East Timor, one of the world’s most impoverished countries. Dili has fought a long legal battle to scrap a 2006 maritime deal with Canberra, which it argued did not give it a fair share of revenues linked to the development of the Greater Sunrise oil and gasfield in the Timor Sea.

A joint venture between Woodside, ConocoPhillips, Royal Dutch Shell and Osaka Gas holds commercial rights over the Greater Sunrise project, which is estimated to have oil and gas reserves worth up to $40bn. In an unusual move, the commercial partners were involved in the recent maritime boundary negotiations between the two parties, highlighting the field’s importance to East Timor’s economy.

“Greater Sunrise has always been the prize in these negotiations and the bottom line is that under this new agreement East Timor would get more oil and gas money,” said Donald Rothwell, professor of law at Australian National University.

Under the terms of the deal, East Timor will get either a 70 or 80 per cent share of revenues flowing from the gasfields, depending on how they are developed by the joint venture partners. This compares with an equal share under the 2006 maritime agreement signed between Dili and Canberra.

East Timor later opposed the 2006 treaty and took legal action against Australia in the International Court of Justice in The Hague. It alleged that under the cover of an international aid programme, Australia bugged its cabinet office in 2004 to obtain commercial advantage in negotiations for the deal, which was struck when the country was still recovering from violence sparked by its 1999 vote for independence.

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The maritime dispute threatened East Timor’s fragile economy, as revenues from its sole operational gasfield, Bayu-Undan, are set to dry up in the early 2020s. The legal action in The Hague also embarrassed Canberra — one of the biggest overseas aid donors to Dili — which has called on Beijing to follow the rule of law in its activities in the contested waters of the South China Sea.

“The agreement is a testament to the way in which international law, in particular Unclos, reinforces stability and allows countries to resolve disputes peacefully. It is an example of the international rules-based order in action,” said Ms Bishop.

Agio Pereira, East Timor’s minister, said the treaty was a landmark for his country and the friendship between Australia and East Timor.

Prof Rothwell said a potential threat posed to the new agreement would be Indonesia’s reaction. “There could be an issue if Indonesia decides it can also revisit the boundaries it negotiated in the 1970s,” he said.

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