Deakin Speaking

Australia's relationship with East Timor is at risk as the deadline looms on a hotly disputed and lucrative liquid natural gas project -- with no resolution in sight.

West Australian-based Woodside Petroleum has until February 23 to reach an agreement with the government of East Timor over the site of processing LNG or else the arrangement between the two is likely to be stopped. This would then trigger the cancellation of Australia’s sea boundary agreements with East Timor.

At this late stage it's unlikely Woodside will change its long-held position and accede to East Timor's demand that the LNG be processed on East Timor’s south coast. Woodside's preferred option is a floating processing platform at the Greater Sunrise LNG field in the Timor Sea.

A serious dispute has broken out between Australian oil company Woodside and the East Timorese government over the processing of gas from the Greater Sunrise field in the Timor Sea. The dispute looks set to lock up one of the richest gas fields in the region and cost Woodside hundreds of millions of dollars already spent on research and development.

At the heart of the dispute is East Timor’s claim for natural gas taken from the joint Australian-East Timorese field to be processed into LNG in East Timor. Woodside has rejected that option, saying it wants to process the gas on a floating platform in the Timor Sea. The East Timorese government has said, however, that its position is not negotiable and that without an agreement on refining in East Timor there will be no agreement to proceed with drilling.