East Timor claims oil and gas rights

East Timor is so poor that it can barely afford to buy school books. But, as it prepares to become an independent nation after elections in August, its future could be transformed by one thing: oil.

East Timor is so poor that it can barely afford to buy school books. But, as it prepares to become an independent nation after elections in August, its future could be transformed by one thing: oil.

Big oil and gas deposits lie beneath the Timor Sea and revenue from them could transform a subsistence economy reliant on foreign aid into a self-sufficient country. But the extent to which the former Indonesian-occupied province will benefit from the windfall depends on the outcome of negotiations between Australia and the United Nations Transitional Administration in East Timor.

Australia is now competing for oil with its poor neighbour. In 1989, Canberra signed a contentious treaty with Indonesia that gave the two countries an equal share of revenue from oil and gas production in a piece of seabed called the Timor Gap ­ even though it lies closer to East Timor's shores.

Now, East Timor is claiming 90 per cent of Timor Gap resources, citing international maritime law that draws ocean boundaries midway between opposing coasts. Estimates suggest that one of the biggest oil fields, Bayu-Undan, will produce £38m a year for governments by 2004. East Timor's current annual budget is £23m. Over the next two decades, total revenue from the fields could reach £4.6bn.

Further talks ended in Melbourne this month without agreement.Nick Minchin, the Australian Resources Minis-ter, said this week that Canberra was committed to giving East Timor a fairer share of the revenue.