• Foreword - Prime Minister Alkatiri
• Timor-Leste
• Seismic Data
• Geology
• Legal Regime
• Fiscal Terms
• Graticulation & Contract Area
• References & Publications

Foreword - Prime Minister Alkatiri
Timor Leste became the World's newest nation on the 20th May 2002. With the supports and assistance of the experts of the petroleum sectors worldwide the Timor-Leste Government has developed a sophisticated and sound petroleum regime. In July 2005 our National Parliament passed the final components of our competitive petroleum and fiscal laws for the exploration and development of our offshore and onshore resources, which will provide a stable, competitive and transparent model. Since the restoration of Independence my Government has adopted the principle of transparency.

In June 2005, the Parliament passed the Petroleum Fund Law, for the management of all petroleum receipts. Transfers to the State Budget are subject to a fullset of transparency measures, including approval by Parliament, oversight by a consultative council and the requirement that companies submit to independent audits.

Timor-Leste's exclusive maritime area offers an exciting prospect for petroleum developers. The first reconnaissance seismic survey of Timor-Leste's exclusive maritime area, which covers the current acreage release, was successfully completed in early 2005. The results if the survey have been very promising. Such promise is further bolstered by the numerous significant hydrocarbon discoveries that have occured in neighboring areas.

We are excited about our future in the petroleum industry and the potential that Timor-Leste's offshore areas hold for us becoming one of the significant hydrocarbon producers in the region.

Mari Bin Amude Alkatiri
Prime Minister of the Democratic Republic of Timor-Leste

Timor-Leste

The colony of Timor declared its independence from Portugal on 28 November 1975 and was invaded and occupied by Indonesian forces nine days later.    On 30 August 1999, in an UN-supervised popular referendum, the people of Timor voted for independence from Indonesia. East Timor was governed by the UN until 20 May 2002 when it was internationally recognized as an independent state called Timor-Leste.

Timor-Leste is 15,400 square kilometres in land area, consisting of the Eastern part of the Island of Timor and Oecusse, an enclave in West Timor (Indonesia).  Today the population of Timor-Leste is just under one million people who are predominantly Catholic. The official languages of Timor-Leste are Portuguese and Tetum.   The main industries are petroleum and coffee and the official currency is the United States Dollar.

In 2004, through a competitive tendering process, the Government of Timor-Leste awarded a contract to the BGP-GGS consortium to undertake a 2D seismic survey (ET-05) of Timor-Leste's offshore area in the Timor Sea. BGP/GGS acquired 6,600 line kilometers of seismic data over an area of 30,000 square kilometers. Purchase of the ET-05 Survey data is a prerequisite for participation in the 2005-6 bidding round, and is available for purchase at www.ggs.biz .

 In 1974 a limited seismic survey was conducted along the southern coast of Timor-Leste. These lines have now been reprocessed by Fugro and are available at www.fugromcs.com.au

 Preliminary interpretations of the area indicate presence of attractive structures and potential petroleum systems from the southern coastline into the northern edge of the JPDA – with low geological risk. The area in and around the Timor Trough also looks attractive.

Survey Area Map

Geology

The island of Timor lies along a zone of  historically intense tectonic activity between the Australian and Asian plates.  Consequently, the structural pattern of the offshore area south of  Timor may be divided into two different types, separated by the Timor Trench. The area north of the trench is characterised by a series of overthrusted and folded sediments, while the area south of the trench is less affected, although tectonism during and after Tithonian time resulted in widespread, less closely spaced, horsts and grabens that have been reactivated in many cases.  

Because Permian and Mesozoic sedimentary deposition occurred before the major thrusting episodes, the regional sedimentary column is demonstrably correlative from Timor Island to the Joint Petroleum Development Area (JPDA) and beyond, where several major economically significant oil and gas accumulations have been discovered in Jurassic reservoirs, and where gas has been discovered in Permian sediments. Tertiary carbonates may also host and trap hydrocarbons migrating from deeper source rocks.

Onshore oil and gas seeps are prevalent. The oil seeps contain very light oil. This is consistent with high gravity oil and condensates being generated from Jurassic source rocks that are encountered in the JPDA and elsewhere in the Timor Sea today.

Interpolating between known deposits of petroleum onshore and the producing fields in the JPDA and beyond, is a logical approach. The region remains very much under-explored, which is why the Timor-Leste Government has given priority to developing a new legal regime to underpin development. Petroleum exploration activity took place before 1975, and is only resuming now.

Read "The Petroleum Potential of East Timor" by Tim Charlton

The Timor-Leste Government has developed a new legal regime for the development of petroleum resources. This followed extensive consultation with both industry and local stakeholders.

 The regime comprises:

• the Petroleum Act

• a model Production Sharing Contract (PSC); and

• the Petroleum Taxation Act

Fiscal Terms

The fiscal regime is a competitive and stable model for petroleum exploration and development. The terms are straightforward and the returns to investors are attractive compared with neighboring countries and the rest of the world. The regime is designed to accommodate a range of field types and sizes, which means that there will be no need for “one-off negotiations” over the fiscal terms of the PSC.

The terms comprise:

• Royalty at 5% of gross production

• Recovery of costs,  with an annual uplift (US 30-year bond rate + 11%) for costs not recovered, from the remainder of production

• Income tax at 30% on profits from the contractor's share of production

• Sharing of profit petroleum, 60 % to contractor and 40% to the State, after recovery of costs plus uplift

• Supplementary Petroleum Tax (SPT) at 22.5% (net rate) when contractor has earned after-tax return of 16.5% on investment

• Withholding tax of 6% on gross payments to suppliers and subcontractors (in place of income tax on profits)

• Timor-Leste has the right to acquire a participating share of up to 20% in any project, to be exercised within 60 days after the announcement of commercial discovery. Timor-Leste will meet its share of costs from the date of exercise onwards.

Graticulation and Contract Area

The offshore exploration area south of Timor-Leste covers an area of approximately 30,000 square kilometres, and extends from the Timor-Leste coast in the North to the JPDA in the south (see Survey Area Map ). Water depths vary between very shallow to 3000 metres. Details of the Contract Area will be made available on our website by October 1st 2005.

The offshore area south of Timor-Leste will be divided into Quadrants and Blocks:

Quadrants are squares of 15 x 15 geographical minutes. This represents approximately 27 x 27 km (approximately 720 sq km). The boundaries of the Quadrants correspond with the 00, 15, 30 and 45 accurate minutes in the WGS84 datum. The Quadrants will be numbered.

Blocks are squares of 5 x 5 geographical minutes. This represents approximately 9 x 9 km (approximately 80 sq km). The boundaries of the Blocks correspond with the 00, 05, 10 etc. accurate minutes in the WGS84 datum. A whole Quadrant thus consists of 3 x 3 Blocks. The Blocks in each Quadrant are numbered 1-9 from left to right, starting in the uppermost left corner. Any Block can be referred to by its Quadrant and Block number, e.g. Block 26/2 (Block 2 in Quadrant 26).

Blocks and Quadrants that intersect the coast line (base line), boundaries to neighbour states or the boundary to the JPDA will be cut accordingly.

A map of proposed Contract Areas will be included in the official announcement of the (Timor-Leste – 2005 Inaugural Offshore Acreage Release).

Contract areas may consist of one or several Blocks or parts of Blocks.

References and Publications