Australian carbon tax threat to East Timor gas revenues

The law of unintended consequences is poised to strike East Timor, one of the world’s poorest nations, which could lose millions of dollars as Australia’s new carbon tax takes a bite out of revenue from offshore natural gas fields shared between the two countries.

The Timorese Government, which is heavily reliant on revenue from Joint Petroleum Development Area in the Timor Sea, only recently learned that could be hit by the tax. Australia’s federal government has acknowledged it needs to strike a compromise with its neighbor but discussions are yet to take place.

Under a bilateral treaty, net revenues from gas produced in the area shared 90-10 between East Timor and Australia. The revenues are split after costs are deducted, including the percentages paid to the companies that extract the gas, which fall under Australia’s carbon tax umbrella.

The Australian Government, of course, gets the money back because the carbon tax flows into its coffers. How East Timor may pay is unclear and depends on future negotiations, though a source said the figure could be in the tens of millions of dollars.

Francisco da Costa Monteiro, president and CEO of TimorGAP E.P., the country’s state-owned oil and gas company, told The Age that the matter was “a serious concern from the Timor-Leste side”.

"If it is USD11 million or USD1 million, from Timor Leste’s perspective it is quite significant. We have a lot of schools to rebuild and healthcare facilities to put in place,” he said.