THE WALL STREET JOURNAL: Australia, East Timor reach gas agreement: "The future of the Sunrise gas project remains dependent on several factors, including the fiscal regime under which it would operate, the cost and location of any development, and the successful marketing of the resource," Woodside said.: Posted Saturday 3 December 2005

CANBERRA, Australia -- Overcoming protracted and sometimes acrimonious negotiations, Australia and East Timor have finalized a revenue-sharing pact covering the US$5 billion Sunrise natural-gas project.

Foreign Minister Alexander Downer told Parliament Thursday that talks were completed late Wednesday, initialing a pact that sets out how the two sides will carve up billions of dollars in royalties.

Canberra is confident the treaty delivers the legal certainty required by Woodside Petroleum Ltd. to revive Sunrise, regarded as the richest prize in the Timor Sea.

"This is a deal which is a good one for both Australia and East Timor," Mr. Downer said. "It safeguards Australia's sovereign interests and it will provide investors with the certainty needed for large-scale resource projects to go ahead."

A person familiar with the situation said the deal could deliver an extra $5 billion to $7 billion in petroleum royalties to East Timor in addition to existing revenue arrangements. In return, East Timor will set aside negotiations on a permanent maritime border for 50 years.

Perth-based Woodside, which shelved the Sunrise venture last year because of the continuing maritime border dispute, must decide whether it will dust off the project. It welcomed news the negotiations have been completed but stressed it is waiting to see the fine print.

"The future of the Sunrise gas project remains dependent on several factors, including the fiscal regime under which it would operate, the cost and location of any development, and the successful marketing of the resource," Woodside said.

Sunrise contains up to $40 billion of natural gas and concentrate, representing a significant windfall for East Timor, a poor nation of 800,000 people that gained its independence in 2002 and still relies heavily on foreign aid.

Woodside owns 33.4% of Sunrise, situated 150 kilometers south of East Timor. Its partners are ConocoPhillips with 30%, Royal Dutch Shell PLC with 26.6% and Japan's Osaka Gas Co. with 10%.

Approximately 20% of Sunrise is in the so-called Joint Petroleum Development Area, while 80% is in waters where Australia claims exclusive jurisdiction. Under the Joint Petroleum Development Area, 90% of oil and gas royalties flow to East Timor and the balance to Australia. Mr. Downer said arrangements under the 2002 treaty covering the are remain intact.

Australian Prime Minister John Howard and his East Timorese counterpart, Mari Alkatiri, are due to formally sign the Sunrise treaty in the second week of January, most likely in Sydney. It then must be ratified by the parliaments of both nations, which is expected to take a couple of months.

Write to Veronica Brooks at veronica.brooks@dowjones.com