17 April 2015

Mina-rai no gas Timor-Leste nian besik hotu ho lalais

Semana kotuk liu ba, Parlamentu Timor-Leste halo diskusaun lalais no aprova revizaun Orsamentu Estadu ba 2015 ho unanimidade. La’o Hamutuk no Deputadu balun sujere katak tenke hamenus despeza tanba haree ba reseita mina-rai nian ne’ebé menus ona, maibé ema uitoan de’it mak hatene katak razaun prinsipál ne’ebé halo Timor-Leste nia reseita ne’e tanba produsaun mina-rai no gas hahú menus daudaun. Ne’e diferente ho folin mina-rai ne’ebé tun sa’e, nivel produsaun sei la sa’e tan ona tanba rezerva besik maran ona. Artigu ida ne’e sei esplora faktu no implikasaun sira husi realidade ida ne’e.

Durante fulan hirak ikus ne’e, lider polítiku sira esplika beibeik katak sira sei la kalkula fila fali matadalan Rendimentu Sustentável Estimadu bazeia ba folin mina ne’ebé tun, maibé ignora maka’as asuntu fundamental ida, katak mina-rai no gas besik maran ona. Revizaun Orsamentu Estadu 2015 nian autoriza gastu biliaun $1.57, mantén nafatin ho montante ne’ebé mak aprova ona iha Dezembru tinan kotuk.  Bainhira orsamentu ne’e gasta ho nivel hanesan iha tinan kotuk nian, 2014, Timor-Leste nia gastu sei aas liu hotu iha 2015 kompara ho tinan sira liu ba. 

Ita moris hela iha nasaun ida entre nasaun sira ne’ebé depende maka’as ba esportasaun mina-rai iha mundu. Iha 2014, 73% husi reseita estadu nian mai husi konversaun riku soin naun renovavel mina-rai no gas ba osan, no 20% seluk mai husi retornu investimentu husi rendimentu mina-rai no gas ne’ebé ita simu iha tinan hirak molok ne’e nian.

Maski nune’e, reseita mina-rai no gas Timor-Leste nian kontinua mihis ho lalais, no ita simu menus reseita 40% hosi mina-rai no gas iha 2014 kompara ho 2013 nian, prinsipalmente tanba kampu Bayu-Undan no Kitan komesa maran daudaun ona.  Liu 75% hosi kampu rua ne’e nia riku soin naun renovavel ne’e ita supa ona- ne’ebé irreversível.

Gráfiku iha leten ne’e hatudu dadus istóriku, inklui mós projesaun sira ne’ebé demonstra ho pontus no liña, ne’ebé la korije ho inflasaun ne’ebé mosu:
  • Montante produsaun mina-rai no gas (liña metan mahar), iha barríl tokon ba tokon kada tinan.[1] Produsaun hahú iha 2003, sa’e maka’as iha 2006 no aproksimadamente konstante to’o 2013, ho produsaun másimu liu mak iha tinan 2012. Total produsaun monu 24% husi 2013 ba 2014.
Projesaun sira ba produsaun hafoin 2014 (liña metan pontillada) ne’ebé Ministériu Finansas halo ne’e bazeia ba informasaun husi kompañia mina-rai sira.[2] Sira hatudu katak produsaun tun konstantamente to’o 2020, hafoin ne’e kampu sira ne’e la profitavel ona atu hala’o operasaun.[3]
  • Folin ba mina matak Brent iha merkadu global (liña mihis mean), iha presu Dolar EUA kada barríl.[4] Timor-Leste nia sorte di’ak tebes iha 2003-2008; mina-rai no gas nia presu fa’an sa’e dala tolu tanba ita nia produsaun iha tempu ne’ebá aumenta. Signifika katak Bayu-Undan halo retornu ne’ebé aas ho kusta kapitál ne’ebé uitoan – momentu ne’ebá, karik kampu ne’e mak ida ne’ebé profitavel liu iha istória ConocoPhillips nian. Presu monu iha 2009 nudár parte husi krize finanseiru global, maibé rekupera fila fali iha 2011, no presu kontinua hanesan to’o tinan 2014 nia klaran, molok monu fali tan.
Liña mean pontillada (.......) ba 2015 no 2016 ne’e hatudu senáriu referénsia daudaun husi projesaun Administrasaun Informasaun Enerjia (EIA) Estadus Unidus nian, no liña kór kafé pontillada (-----) hatudu projesaun ‘prudente’ antigu ne’ebé Ministériu Finansas uza iha Jullu tinan kotuk atu prepara Orsamentu Estadu 2015 nian. Revizaun projesaun ne’ebé prudente maizumenus $10/barríl ki’ik liu ho EIA nia senáriu referénsia ba 2015, no sei ki’ik liu tan iha tinan hirak oin mai.
  • Reseita mina-rai no gas ne’ebé Timor-Leste simu (liña matak duplu), iha biliaun dolar kada tinan, hanesan hatudu iha eskala iha liman los ne’e. Kreximentu ida ne’e lalais liu bainhira  produsaun no presu mina-rai nian aumenta sa’e to’o 2008, monu iha 2009 tanba mina folin tun, no sa’e fila fali iha 2012 bainhira presu no produsaun aumenta fila fali. Maski nune’e, to’o 2014 reseita tun to’o besik metade husi nivel reseita másimu iha 2012 nian. Maski presu no produsaun menus hotu, impaktu ne’ebé boot liu mai husi produsaun menus. Maski karik presu sei sa’e fali ba liu $100/barríl, produsaun sei kontinua atu tun, no nune’e mós reseita.
Liña trasejada kór matak (.....) hafoin 2014 hatudu projesaun reseita husi Orsamentu Estadu 2015 nian, maibé ida ne’e bazeia ba projesaun presu tinan kotuk nian (liña trajesada kór kafé) ne’ebé aas liu realidade atuál ninian. Durante tinan tolu oin mai, reseita sei signifikamente menus liu duke ida ne’ebé mak Ministériu projeta ona, no liu tinan tolu ne’e, sei la iha tan mina-rai no gas barak mak hela.[5]

Osan barak liu mai husi Bayu-Undan


Bainhira halo análize ba reseita ho detallu liu ne’e sei fó hanoin kle’an liután hanesan hatudu husi gráfiku ida ne’e. Liña matak, total reseita petroleum ne’ebé tinan tinan ita simu, mak hanesan ho gráfiku ida uluk liu, ne’ebé inklui projesaun antigu Ministériu Finansas nian ne’ebé halo (projesaun) ba 2015 ba oin.  Barra sira ba kada tinan hatudu reseita ne’ebé simu husi kada kampu mina no gas:
  • Bayu-Undan (majenta) fornese porsaun maioria no nudár kampu mesak ida ne’ebé sei kontinua produsaun hafoin 2016. Reseita husi kampu ne’e to’o nia másimu iha 2011 maibé iha posibilidade atu kontinua to’o maizumenus 2021.
Maski mina-rai (líkidu) mak fornese maioria reseita molok 2013, liu metade rendimentu agora husi kampu ida ne’e mai husi gas natural. Gas (bolha) ne’e fura ho volume konstante atu mantén kapasidade kadoras no planta LNG, iha tempu hanesan produsaun mina-rai komesa menus tanba presaun husi kampu ne’ebé menus. Bara ho listras diagonal hafoin 2014 mak projesaun ‘prudente’ La’o Hamutuk nian ba mina-rai Bayu-Undan no hanesan kombinadu. 
  • Kitan (kinur) hahú nia produsaun mina-rai iha 2011. Reseita Kitan nian tun 85% iha 2014 tanba mina ne’ebé hela iha rezerva la dun barak ona; produsaun ne’e sei hotu iha 2016.
     
  • Elang-Kakatua (mean) hahú nia produsaun mina-rai iha 1999 no fó reseita uitoan los to’o maran iha 2006. Timor-Leste la konsege atrai kompañia seluk ida atu halo operasaun iha kampu ne’e hafoin ConocoPhillips deside katak kampu ne’e la profitavel ona.

  • Impostu sira ne’ebé atrazadu (listras vertikál metan) foin halo avaliasaun no rekolla husi Ministériu Finansas husi kompañia sira hahú husi 2011; tuir loloos kompañia sira tenke selu taxa sira husi projetu oin oin iha tinan sira molok 2011. Kompañia sira la konkorda ho avaliasaun sira no konsege selu maski ho protestu; karik kompañia sira manán sira nia rekursu, Timor-Leste sei tenke fó fila fali tokon $350 ka liu, ba kompañia sira.
Husi 2003 to’o 2014, Timor-Leste konverte ona ninia riku soin mina-rai no gas ba osan biliaun $20.1 ne’ebé ita gasta ona biliaun $6.0. Restu ne’ebé mak seidauk gasta rai hela iha Fundu Petróleu (FP), no investe ona iha títulu no asaun sira iha fatin sira iha mundu. Investimentu sira ne’e fó fali retornu biliaun $2.5 durante tinan 12 ikus ne’e, ne’ebé depózitu ona iha FP. Iha fin 2014, riku soin iha FP mak biliaun $16.5, menus tokon $95 kompara ho balansu iha fulan neen kotuk liu ba.     

Liña metan duplu iha gráfiku leten ne’e hatudu reseita annual husi investimentu Fundu Petrolíferu (FP), ne’ebé hatama fila fali ba  FP. Maski iha esperansa balu katak rendimentu hirak ne’e bele troka fali reseita husi mina-rai no gas hafoin kampu sira maran ona, klaru katak sei ki’ik liu no, tanba balansu iha FP la iha kreximentu tan ona, iha posibilidade ki’ik atu bele kontribui ba aumentu signifikante iha FP. Durante 2014, Fundu Petrolíferu nia investimentu fó fali reseita tokon $502, uitoan liu kompara ho tokon $932 ne’ebé Governu hasai husi FP atu finansa Orsamentu Estadu 2014 nian. Retornu real husi investimentu FP nian iha tinan kotuk mak 2.5%, ki’ik liu fali asumsaun ne’ebé mak halo iha matadalan Sustentabilidade Fundu nian.[6]

Orsamentu estadu 2015 sei hasai tokon $1,327 husi Fundu Petrolíferu, boot liu dala rua husi retornu ne’ebé hetan iha 2014. Maski rendimentu rendimentu husi investimentu FP nian depende ba merkadu finansiál global, La’o Hamutuk fiar katak tenke iha prudensia ba projesaun hirak ne’e, no liña pontillada metan ne’e hatudu ami nia estimativas. 

Senáriu ida husi La'o Hamutuk nia modelu Sustentabilidade.
Karik estadu kontinua ho tendénsia gastu hanesan agora daudaun ne’e, ho projetu sira ne’ebé planeia ona, no empréstimu sira ne’ebé sei selu fali iha futuru, klaru katak rendimentu husi mina-rai no retornu husi Fundu Petrolíferu sei la sufisiente, no balansu iha FP sei komesa atu monu. Haree ba reseita naun petrolíferu ne’ebé uitoan liu, La’o Hamutuk nia projesaun hatudu katak Fundu Petrolíferu tomak bele mamuk hahú husi 2025, ho implikasaun sériu ba atividade estadu nian hafoin tempu ne’ebá. Oinsá mak ita sei selu eskola sira, ospitál sira, polísia no manutensaun – sá tan pensaun sira, viajen sira no funsionáriu públiku sira – bainhira ita nia riku soin la iha ona?

Posibilidade katak sei iha tan riku soin mina no gas


Ema hotu hakarak atu Timor-Leste iha mina no gas barak liután, liu fali kampu tolu ne’ebé temi iha leten. Bainhira disputa kona-ba fronteira maritima ho Australia no fatin atu prosesa gas natural ne’e resolve ona, nune’e dezenvolvimentu kampu Greater Sunrise bele komesa la’o ona, no Timor-Leste bele komesa simu reseita husi dezenvolvimentu ne’e hafoin tinan lima tan. La iha ema ida mak hatene gas natural ne’e sei iha folin hira iha dékada sira oin mai ka riku soin Sunrise ne’e hira mak sei fahe ho Australia, maibé Timor-Leste bele iha total reseita husi Sunrise atu hanesan ho saida mak ita sei simu husi Bayu-Undan – entre biliaun $20-$25 – ne’ebé sei lori durasaun tinan 15-20 mak bele hetan.

Ofisiál sira iha setór petróleu iha Timor-Leste fiar maka’as tebes katak nasaun ida ne’e sei iha rezerva mina-rai no gas adisionál ne’ebé seidauk deskobre. Maski buat hotu iha posibilidade, maibé susar tebes atu hetan tan kampu ida ne’ebé boot hanesan Bayu-Undan ka Sunrise, hanesan kompañia mina-rai sira, durante kuaze metade tinan atus ida nia laran, buka ona iha ita nia area tasi okos no rai maran ne’ebé limitadu, hala’o estudu sizmiku oin-oin no koko ona esplora mós kampu 50 resin. Kitan mak kampu mesak ida ne’ebé iha folin komersiál hafoin halo esplorasaun barabarak ne’ebé deskobre iha 1990-tal bainhira hamosu Tratadu ilegál Timor Gap nian iha tempu ne’ebá. Bainhira Timor-Leste koko fa’an kontratu foun ba esplorasaun iha tasi okos iha 2006, kompañia sira ne’ebé mak involve ona iha ne’e nein ida mak halo submisaun ba tenderizasaun sira ne’ebé refere. Ami hein katak sei iha espresaun interese barak liután (husi kompañia sira) iha tenderisasaun ne’ebé sei loke iha tempu oin mai (maski prosesu ida ne’e adia bei-beik ona dezde 2010), no katak kompañia sira sei deskobre rezerva foun sira ne’ebé la hetan husi esplorasaun anterior, maibé la matenek atu halo polítika sira bazeia ba mehi sira hanesan ne’e. 

Sei lori maizumenus tinan sanulu tan atu Sunrise ka kampu sira ne’ebé seidauk identifika bele prodús reseita ruma. To’o tempu ne’ebá, Timor-Leste sei iha ema barak liu tan, no sira sei hein no presiza atu iha kualidade servisu no infrastrutura ne’ebé di’ak. Bainhira Estadu Timor-Leste bele duni fornese ida ne’e ba ninia sidadaun sira entre tempu agora ba tempu ne’ebá, no liu tan ida ne’e, entaun ita presiza hahú ho planu sira, estratéjia sira no implementasaun ne’ebé realístiku no efetivu hahú husi tempu agora.

Polítika na’in sira iha ona informasaun iha artigu ida ne’e, maibé la mosu atu hadalan desizaun orsamentál no ekonómiku sira. Asuntu importante liu mak la’ós tanba viola beibeik matadalan RSE nian, maibé oinsá Estadu Timor-Leste bele servi nia povu sira ba dékada oin mai. Promesa Lei Fundu Petróleu nian ba jerasaun sira iha futuru ne’e sei susar tebes atu bele kumpre.[7]

Notas

15 April 2015

Timor-Leste’s oil and gas are going fast

Download a printable PDF of this article ka liga ba blog ida ne'e iha Tetum
Last week, Timor-Leste’s Parliament briefly discussed and unanimously approved a revision to the State Budget for 2015. La’o Hamutuk and some Members of Parliament suggested that expenditures be reduced in light of falling petroleum revenues, but few pointed out that the main reason Timor-Leste is getting less money is because oil and gas production are declining. Unlike the volatile oil price, production rates will not go back up because the reserves are running out. This article will explore the facts and implications of this reality.

During the last couple of months, political leaders repeatedly explained that they would not recalculate the Estimated Sustainable Income guideline in light of the falling oil price, but they have largely ignored the more fundamental issue of running out of oil and gas. The revised 2015 State Budget authorizes spending $1.57 billion, unchanged from last December. If the budget is executed at the same rate as in 2014, Timor-Leste will spend more in 2015 than ever before.

We live in one of the most petroleum-export-dependent countries on earth. In 2014, 73% of state revenues came from converting nonrenewable oil and gas wealth into cash, and another 20% was from returns on investing oil and gas income received in earlier years.

However, Timor-Leste’s oil and gas revenues are dropping rapidly, and we received 40% less revenues from them in 2014 than in 2013, mainly because the Bayu-Undan and Kitan fields are being used up. More than 75% of their non-renewable wealth has already been extracted – and this is irreversible.
The above graph shows historical data followed by dotted or dashed projections, not corrected for inflation:
  • Amount of oil and gas produced (thick black line), in millions of barrels per year.[1]   Production began in 2003, increased rapidly until 2006, and was approximately constant until 2013, with the highest level in 2012. Total production dropped 24% between 2013 and 2014.
Production projections after 2014 (dotted black line) from the Ministry of Finance are based on information from oil companies.[2]  They show a steady decline until 2020, after which the fields will no longer be profitable to operate.[3]
  • World market price for Brent crude oil (thin red line), in US dollars per barrel.[4] Timor-Leste was very lucky in 2003-2008; the selling price of oil and gas tripled as our production ramped up. This meant that Bayu-Undan generated high revenues with low capital costs – for a time, it may have been the most profitable field in ConocoPhillips history. Prices fell in 2009 as part of the global financial crisis, recovered by 2011, and were steady until the middle of 2014, before falling again.
The dotted red line for 2015 and 2016 shows recent reference case projections by the U.S. Energy Information Administration, and the dashed brown line shows the outdated ‘prudent’ projections (halfway between last year's low and reference cases) that the Ministry of Finance used last July to prepare the 2015 State Budget. Revised prudent projections would be at least $10/barrel below EIA’s current reference case for 2015, and even lower for subsequent years.
  • Oil and gas revenues received by Timor-Leste (double green line), in billions of dollars per year, as shown on the scale at right. This increased rapidly while production and prices were going up until 2008, dropped in 2009 due to the oil price drop, and climbed again until 2012 as prices and production rose. However, by 2014 revenues had descended to about half of 2012 peak levels. Although both prices and production fell, the larger impact is from waning production. Even if prices go back up to more than $100/barrel, production will continue to decline, taking revenues with it.
The dashed green line after 2014 shows revenue projections from the 2015 State Budget, but these were based on last year’s price projections (dashed brown lines) which are much higher than current reality. During the next three years, revenues are likely to be significantly lower than the Ministry projected, and after that there won’t be much oil and gas left.[5]

    Bayu-Undan provided most of the money



    Analyzing the revenues in more detail gives additional insights, as shown in this graph. The green line, total petroleum revenues received each year, is the same as in the first graph, including the Ministry of Finance’s outdated projections from 2015 on. The bars for each year show the revenue received from each oil and gas field:
    • Bayu-Undan (magenta) provides the largest portion and is the only field which will be in production after 2016. Its revenues peaked in 2011 but could continue until around 2021.
    Although oil (liquids) provided most income before 2013, more than half of the field’s income now comes from natural gas. Gas (bubbles) is extracted at a constant rate to keep the pipeline and LNG plant at capacity, while oil production is falling due to declining field pressure. Diagonally striped bars after 2014 are La’o Hamutuk’s ‘prudent’ projections for Bayu-Undan oil and gas combined.
    • Kitan (yellow) began oil production in 2011. Kitan revenues dropped 85% in 2014 because there is not much oil left in the reserve; they will end entirely in 2016.
    • Elang-Kakatua (red) began oil production in 1999 and provided a little revenue until it was exhausted in 2006. Timor-Leste was unable to attract another company to operate the field after ConocoPhillips decided it was no longer profitable.
    • Overdue taxes (black vertical stripes) were assessed and collected by the Ministry of Finance from the companies beginning in 2011; they should have been paid in prior years from various projects. The companies did not agree with the assessments and paid under protest; if they win their appeals Timor-Leste could have to return $350 million or more.
    From 2003 through 2014, Timor-Leste converted $20.1 billion of its oil and gas wealth into dollars, of which we spent $6.0 billion. The remainder is in the Petroleum Fund (PF), invested in bonds and stocks around the globe. These investments have earned $2.5 billion over the last 12 years, which was deposited in the PF. At the end of 2014, the PF was worth $16.5 billion, $95 million less than its balance six months earlier.

    The double black line on the above graph shows the annual revenues from investing the Petroleum Fund, which are re-deposited into the PF. Although some hope that these earnings could replace oil and gas revenues after the fields are exhausted, it is clear that they are much smaller and, as the Petroleum Fund’s balance is no longer growing, are unlikely to increase significantly. During 2014, the Petroleum Fund’s investments earned $502 million, far less than the $932 million the Government withdrew from the PF to finance the 2014 State Budget. The PF’s real return on investment last year was 2.5%, lower than the Fund’s sustainability guideline assumes.[6]

    The 2015 state budget will withdraw $1,327 million from the Petroleum Fund, more than double what it earned in 2014. Although future PF investment earnings depend on the global financial markets, La’o Hamutuk believes they should be projected with prudence, and the dotted black line shows our estimates.

    One scenario from La'o Hamutuk's sustainability model.
    If current trends in state spending continue, with planned projects and loans paid for in the future, it is clear that neither oil revenues nor Petroleum Fund earnings will be sufficient, and the PF balance will start to fall. In light of small non-oil revenues, La’o Hamutuk’s projections show that the Petroleum Fund could be entirely empty by 2025, with severe implications for state activities after that. How will we pay for schools, hospitals, police and maintenance – let alone pensions, trips and civil servants – after all our wealth is gone?

    Possibilities for more oil and gas wealth


    Everyone wishes that Timor-Leste had more oil and gas than the three fields discussed above. Once long-standing differences over the maritime boundary with Australia and where to process the natural gas are resolved, development of the Greater Sunrise field could proceed, and Timor-Leste could start receiving revenues about five years later. Nobody knows what natural gas will be worth decades in the future or what fraction of Sunrise wealth will be shared with Australia, but Timor-Leste’s total revenues from Sunrise may be around what we will have received from Bayu-Undan – $20-$25 billion – spread out over 15-25 years.

    Petroleum officials in Timor-Leste are optimistic that the country has undiscovered, additional oil and gas reserves. Although anything is possible, it is extremely unlikely that another field as large as Bayu-Undan or Sunrise exists, as petroleum companies have explored our limited sea and land area for half a century, conducting many seismic surveys and drilling more than 50 test wells.  Kitan is the only commercially viable field discovered after the flurry of exploration in the 1990s when the illegal Timor Gap Treaty came into effect. When Timor-Leste last offered new offshore exploration contracts in 2006, none of the companies already involved here submitted bids. We hope there will be more interest in the upcoming bidding round (which has been repeatedly delayed since 2010), and that companies will discover new reserves missed by previous explorations, but it would be foolhardy to make policies based on such dreams.

    It will take at least ten years before Sunrise or any yet-to-be-discovered fields produce much revenue. By that time, Timor-Leste will have many more people, and they will expect and deserve better-quality public services and infrastructure. If the State of Timor-Leste is to be able to provide for its citizens between now and then, and even after that, we need to begin more realistic and effective planning, strategies and implementation today.

    Policy-makers already have the information in this article, but it doesn’t appear to guide budgetary and economic decisions. The most important issue is not the usually-violated ESI guideline, but how the state of Timor-Leste will be able to afford services for its people over the next decade. The Petroleum Fund Law’s promise to future generations may already be impossible to keep. [7]

    Notes

    01 April 2015

    LH sujere katak Timor-Leste tenke hamenus despeza iha Orsamentu Retifikativu 2015

    Atu hetan submisaun ida ne’e no dokumentu sira seluk kona-ba Orsamentu Retifikativu 2015, iha lian Tetum no Ingles, bele vizita web ka download submisaun iha English ka Tetum.

    Iha loron 26 Marsu 2015, Komisaun C Parlamentu Nasional konvida La’o Hamutuk atu fahe hanoin kona-ba Retifikasaun Orsamentu Estadu 2015. Ne’e duni La’o Hamutuk halo submisaun ida ne’ebé haruka ona ba Komisaun C iha loron 30 Marsu. Iha karta ne’e La’o Hamutuk hato’o kona-ba oinsá Estadu Timor-Leste bele hamenus despeza no promove sustentabilidade fiskál iha nasaun foun ida ne’e.

    Submisaun ida ne’e bazeia ba preokupasaun rua:
    1. Orsamentu Retifikativu ne’ebé Governu aprova la refleta kondisaun real ne’ebé oras ne’e daudaun Timor-Leste enfrenta. Folin mina iha merkadu internasionál tun no ida ne’e fó impaktu ba reseita husi mina no gas. Iha tempu hanesan folin moeda dolar EUA nian sa’e, no nudár rezultadu, investimentu Fundu Petrolíferu ne’ebé Timor-Leste halo iha moeda seluk nia retornu sai menus mós.
    2. Orsamentu Retifikativu ne’e la refleta Governu nia esforsu atu redús despeza no promove efikás no sustentabilidade fiskál. La’o Hamutuk hanoin katak iha tinan ne’e, Governu Timor-Leste iha oportunidade ne’ebé di’ak atu uza rikusoin povu nian atu hadi’ak liu tan povu hotu nia moris, liuliu ba futuru.
    Oinsá mak Governu bele hamenus despeza públiku?  La’o Hamutuk hanoin katak bele hamenus despeza Estadu, tanba konsiderasaun ba asuntu hirak tuir mai ne’e.
    • Halo kalkulasaun foun ba Rendimentu Sustentável Estimativu (RSE) iha Orsamentu Retifikativu 2015
    Revizaun ida ne’e bele refleta katak folin mina ne’ebé tun maka’as iha merkadu mundiál, no ida ne’e hamenus estadu nia reseita. RSE atuál tenke tun hosi tokon $638 ba tokon $504. RSE tokon $638 ne’e prepara iha 2014 wainhira folin sei aas hela.  Iha tempu ne’ebá (2014) folin mina Brent kada barríl mak $108. Maibé folin mina iha merkadu tun ki’ik liu $50 kada barríl.

    Governu deside ona sei mantén nafatin montante tokon $1,570 iha Orsamentu Retifikativu ba 2015. Bazeia ba total orsamentu ida ne’e, Governu planu atu foti tokon $1,327 husi Fundu Petrolíferu ne’ebé kompostu hosi tokon $638 RSE, no foti tan tokon $689 dala ida husi Fundu.

    Tuir kalkulasaun RSE atuál La’o Hamutuk nian, ne’ebé bazeia ba folin mina ne’ebé tun, Governu tuir loloos tenke redús RSE ba tokon $504. Ida ne’e tanba Timor-Leste lakon tokon $71 husi impaktu folin mina ne’ebé tun, lakon tokon $13 husi investimentu tanba mudansa iha folin moeda Dolar EUA, no lakon tokon $50 husi produsaun iha futuru tan razaun komersiál.

    Hodi redús RSE ba tokon $504 Governu sei foti de’it tokon $1,048 husi Fundu Petrolíferu ba tinan ida ne’e, no redús mós orsamentu ba maizumenus tokon $1,291 nune’e bele hamenus despeza Estadu nian kuaze tokon $279 iha 2015.
    • Atualmente kustu ba bens no servisu reduzidu ona.
    Orsamentu Retifikativu tenke refleta katak kustus ba bens no servisu sira redús ona tanba liu husi prosesu restruturasaun, númeru membru Governu oras ne’e hela 38 de’it ona.

    Governu mós bele poupa maizumenus tokon $50 husi presu kombustivel ba jeradór no veíkulu sira, tanba folin kombustivel iha grosir ne’e tun besik metade kompara ho folin kombustivel tinan ida liubá.

    Estadu mós bele poupa kuaze tokon $50 atu sosa servisu no sasán husi nasaun importadór sira ne’ebé la uza moeda dolar EUA tanba moeda ne’ebé oras ne’e Timor-Leste uza, nia folin troka boot liu moeda hanesan Rupiah no seluk tan. Ita labele fó ba importadór sira de’it mak atu hetan benefísiu husi folin Dolar ne’ebé forte.
    • Revee fali kustu projetu atu nune’e bele protege liu tan rikusoin povu nian.
    Gastus ba mega projetu sira hanesan Projetu Tasi Mane, Portu Tibar, ZEESM no seluk tan ne’e bele lakon osan de’it. Durante ne’e kustu operasional no vantajen husi projetu sira ne’e seidauk klaru, no Governu kontinua soe osan povu nian ba projetu hirak ne’e. Ita mós tenke konsidera katak implementasaun projetu sira ne’e iha Timor-Leste dala barak karun liu kompara ho iha rai seluseluk. Tan ne’e ami sujere atu labele gasta osan barak tan ba projetu sira ne’ebé seidauk hatene se sei fó benefísiu klaru ba Timor-Leste atu nune’e bele evita lakon osan barak liután.
    • Evita dotasaun la nesesáriu sira.
    Alokasaun orsamentu ba ZEESM porezemplu, Governu hakarak atu aloka tan tokon $10 iha Orsamentu Retifikativu nian, no fó mós tokon $1.5 atu selebra kolonizasaun Portugés nian ba povu Timor. Ida ne’e la nesesáriu, no horisehik Komisaun Eventual iha PN aumenta ho tokon $50 tan. La’o Hamutuk hanoin katak wainhira halo dotasaun foun Deputadu sira tenke hatene ona progresu balun husi osan tokon $82 ne’ebé aloka uluk ona ba ZEESM. La’o Hamutuk hanoin katak projetu ZEESM la iha klareza ba sistema aprovizionamentu, kontabilidade no viabilidade. Vantajen ba Timor-Leste mós ita seidauk hatene.
    • Ita labele depende ekonomia Timor nian ba petróleu.
    Iha relatóriu ikus ADB halo hatete katak “Ho produsaun mina ne’ebé hamenus daudaun no folin enerjia ne’ebé ki’ik indika nesesidade atu diversifika ekonomia [Timor-Leste nian] liu husi enkoraja investimentu privadu.” No sira bolu atensaun katak “Nu’udar reseita husi kampu sira ne’ebé iha komesa menus ona, presiza iha polítika fiskál ne’ebé prudente atu evita poupansa Fundu Petrolíferu atu mohu ho lalais.”

    Investimentu ne’ebé boot tenke halo mós ba setór sosiál no ekonomia sira seluk hanesan edukasaun, saúde, agrikultura no indústria ki’ik sira.  Despezas boboot ba projetu hanesan Tasi Mane atu sai nudár báze indústria ba ekonomia Timor ne’e risku tebes.

    La’o Hamutuk halo estimatizasaun katak se Governu kontinua ho lala’ok despeza ida agora ne’e, Fundu Petrolíferu sei bele finansa de’it orsamentu Estadu nian tinan 5 to’o tinan 8 hafoin 2020 wainhira Bayu-Undan maran ona. Tanba ne’e La’o Hamutuk husu atu desizaun sira halo ho prudente no matenek liután ba futuru Timor-Leste nian.
    La’o Hamutuk konsidera katak retifikasaun orsamentu la’ós atu nune’e aumenta de’it despeza, maibé mós responsabilidade ida ba Governu atu hamenus despeza estadu. No hirak ne’e tenke tetu ho di’ak bazeia ba situasaun ne’ebé Timor-Leste hasoru oras ne’e daudaun no iha futuru. Ami hanoin katak tinan 2015 mak oportunidade di’ak ba Governu atu poupa osan, halo jestaun di’ak ba finansa públiku ho responsavel liu tan atu nune’e bele benefisia jerasaun Timoroan ohin loron no futuru.
     
    Komunikadu Imprensa ne’e halo molok relatóriu husi Komisaun Eventual nian publika. Maibé tuir pareser ne’ebé iha, maski total orsamentu la muda maibé Komisaun Eventual deside aloka tan tokon $50 ba ZEESM no ko’a Fundu Infrastrutura balun.  Ami preokupa tebes kona ba kuak ZEESM nian, bele konsume montante boot husi povu nia rikusoin, no karik sei laiha benefísiu klaru ba povu Oekusi ka povu Timor-Leste tomak.

    Hanesan ho prosesu orsamentu sira seluk iha pasadu, Komisaun Eventual ho jenerosidade ne’ebé boot ba ZEESM, aumenta dotasaun durante 2015 nian ba tokon $133.5. Maski kresimentu PIB iha Timor-Leste monu ona ba ‘mid-single-digits’, no reseita mina-rai nian tun, osan ZEESM nian ba 2015, ne’ebé aloka nudár ‘transferénsia públiku’ la ho espesialidade no kontabilidade, sa’e maka’as tebtebes:
    •     Tokon $  9.9 iha Proposta Orsamentu Governu nian (Out. 2014)
    •     Tokon $ 81.9 mak aprova iha Parlamentu Nasional (Dez. 2014)
    •     Tokon $ 93.4 iha Governu nia Proposta Orsamentu Retifikativu (Fev. 2015)
    •     Tokon $133.4 ne’ebé Komisaun Parlamentar nian rekomenda (Mar. 2015).

    18 March 2015

    Stop spending good money on faint hopes for Beaçu LNG

    Bele hetan karta aberta ida ne'e no Komunikadu Imprensa iha Tetum.

    On 17 July 2014, Timor-Leste's National Procurement Commission (NPC) invited proposals (detailed request) for the "Pre-Front-End Engineering Design Study" for an LNG Plant in Beaçu to process natural gas from the Greater Sunrise field.  On 10 March 2015, NPC announced that it intends to award the $3.8 million contract to the British company Foster Wheeler Ltd.  La'o Hamutuk protested, explaining that uncertainties and future delays around the gas pipeline from Greater Sunrise to Beaçu make it inadvisable to spend any more of our people's money on this improbable dream. 
    More information on Beacu LNG as well as our letter to NPC are on our website. The following is a slightly abridged version of the letter, with graphics and links added.

    17 March 2015

    To:   President Aniceto do Rosario, National Procurement Commission

    CC:   Prime Minister Rui Maria Araujo, Minister of Petroleum and Mineral Resources Alfredo Pires, Minister of Planning and Strategic Investment Kay Rala Xanana Gusmão, TimorGAP President Francisco Monteiro, media, public

    Re: Tender RFP/045/MPRM-2014


    The National Procurement Commission's 11 March Intent to Award the LNG Pre-FEED contract to Foster Wheeler states that NPC will respond to protests within five days. La’o Hamutuk hereby protests this award, and we encourage the NPC to suspend processes, including contract awards, for all work related to the Beaçu LNG plant, the Betano refinery, the Sunrise gas pipeline and the highway between Suai and Beaçu.

    TL's full entitlement under international law.
    Current treaties share undersea oil and gas.
    The most important reason not to award this contract is that the LNG plant need gas from Greater Sunrise piped to Timor-Leste,  which will not occur in the predictable future. Therefore, this Pre-FEED design is just a waste of money.  In order for Timor-Leste to benefit from this project, the following needs to occur:

    1.  Timor-Leste and Australian authorities need to reach a secure agreement about maritime boundaries or, at the very least, a long-term agreement about Sunrise unification, applicable laws, and sharing of revenues and risks. We agree with recent Government policy that the CMATS Treaty and Sunrise Unitization Agreement do not respect Timor-Leste’s sovereignty and international law. However, they need to be replaced by something else, hopefully more stable, before investors will be interested in putting money into the Sunrise project.

      In 2008, we published a
      book on Sunrise LNG in TL.
    2. Timor-Leste, Australia and the Sunrise Joint Venture partners need to agree that the Sunrise field should be developed with a pipeline to Beaçu and an on-shore LNG plant in Timor-Leste. For the last several years, the companies in this project have strongly argued that a floating plant is the most profitable way to liquefy Sunrise gas. Because all sides refuse to divulge information, La’o Hamutuk is unable to evaluate whether the companies and/or TimorGAP are wrong, but it is clear that no agreement will be reached without major changes in the companies’ positions.

    3.  The Sunrise Gas Pipeline/LNG plant will have to be commercially viable; investors must be confident enough in the project’s return so that they will invest the several billion dollars it will cost to develop. Over the last several years, the market price of natural gas has fallen sharply, due to non-conventional gas being developed. More recently, the fall in global oil prices has reduced the value of Sunrise output. This uncertainty, combined with reduced revenues, has caused petroleum companies all over the world to reduce their investment and spending on new projects, especially those with unresolved issues or questionable profitability.
            Woodside Petroleum, the operator of the Greater Sunrise project, announced last month that it had “exhausted all activities” on Sunrise, and that it was shelving the project indefinitely. CEO Peter Coleman said “…we don’t know what the regulatory framework is, we don’t know what the fiscal framework will be, so we can’t evaluate this project and we can’t put it up to buyers as to being a viable project that they would be interested in.”

    4. Investors, whether they be private companies or the Government of Timor-Leste (through the TimorGAP National Oil Company), need to have money available, as well as sufficient certainty that they will recover their investment and make a profit, to decide to go ahead with the project.
            Timor-Leste’s Petroleum Minister has frequently stated that Timor-Leste is ready to spend $800 million to subsidize a pipeline to Beaçu, and perhaps much more for the LNG plant and other Sunrise project components.  He has offered to buy the shares of oil companies who are reluctant to develop Sunrise because they see it is unprofitable. We hope that much deeper analysis is done; it would be foolhardy for Timor-Leste to spend a sizable portion of its people’s total wealth (revenues received already from the Bayu-Undan field) on a very expensive, risky project that commercial experts have decided not to invest in. National pride should not override technical expertise and common sense.

    5. It is a challenging, complicated task to evaluate, plan, manage, build, operate and decommission a complex LNG plant project. Sadly, the record of Timor-Leste’s petroleum authorities so far is not encouraging. The Tasi Mane project has suffered repeated delays, changes of plans, wasted money and poor transparency and accountability.  TimorGAP has yet to make a convincing case that any component of Tasi Mane is financially or socially beneficial.

    6. The Sixth Constitutional Government has been in office for only a month and needs to determine its priorities in the new political and economic context. It will take time to do this properly, and Timor-Leste should not take on new contractual or financial obligations for projects which may well be cancelled.

    TimorGAP showed this status summary for the
    Beacu LNG Plant in November 2012.
    Since its inception in 2009, Tasi Mane project components are often delayed, with cost estimates rising and falling without explanation.  Little information is available about how much Timor-Leste will have to invest in this project and what the return is expected to be. The 2013 Annual Action Plan for MPRM and TimorGAP included “Finalize the FEED study for the LNG plant," but now, two years later, the contract for the Pre-FEED (not FEED) is only just being awarded. Given all the uncertainty, it would be better to wait.

    During the last five years, Timor-Leste has spent more than $20 million to explore the Sunrise pipeline option to Timor-Leste, and perhaps more in legal costs. Can we afford to continue to do this?

    Last month, La’o Hamutuk suggested that the 2015 state budget should be reduced to adapt to falling oil and gas revenues, the global oil price drop and the rising U.S. dollar.  Although the Ministry of Finance declined to accept our recommendation, we continue to believe that caution is appropriate before committing Timor-Leste to additional expenditures, especially those with doubtful benefits.

    A few days ago the World Bank and the Ministry of Finance released their Public Expenditure Review on Infrastructure.  The report does not specifically discuss the Tasi Mane Project (perhaps due to political concerns), but it underlines the urgency of “addressing the challenge of ‘White Elephants’ (projects with low to negative economic rates of return.)” The findings of this report should be studied carefully before committing further resources to the Tasi Mane project, especially to its Betano and Beaçu components for which detailed design, contracting and construction has not yet begun.

    During its four years of existence, TimorGAP has not demonstrated the financial, managerial or technical maturity necessary to manage a project of this magnitude. Last August, La’o Hamutuk raised concerns about TimorGAP’s accountability, income, wisdom and transparency in a letter to the Court of Appeals.  A few months later, TimorGAP published its first two annual reports.  Although the reports describe great dreams for Beaçu LNG, they are not accompanied by hard facts. On the contrary, the 2013 report shows that TimorGAP has yet to establish the ‘single auditor’ which is a fundamental part of its legal structure, and will not disclose the obligations it has imposed on Timor-Leste through its joint ventures and contracts. When TimorGAP presented to Parliament last November on the proposed State Budget for 2015, its President left before MPs could ask him questions, and his written presentation explained that the money for LNG Pre-FEED in the 2014 budget hadn’t been spent due to delays in tendering, but that the contract would be signed in November 2014.  The 2015 State Budget carries over $5 million for the Pre-FEED study from 2014 in the Infrastructure Fund, but will not spend it until 2016, adding $1 million more in 2017.

    We hope that the disputes with Australia and Woodside will eventually be resolved. At that point, we will need a timely, objective and comprehensive cost-benefit-risk analysis of the Sunrise development options, independent of political agendas and pre-determined conclusions. If this analysis shows that an LNG plant in Beaçu will provide the best net economic and social benefits to Timor-Leste’s people, then that would be the appropriate time to contract for a pre-FEED design for the LNG plant.

    This will be many years in the future, with more advanced technology available and different market dynamics than those existing today, and a study done in 2015 will be obsolete by then. It should also have a broader Terms of Reference – the proposed pre-FEED study focuses almost entirely on construction, with little attention to operation and none to environment, economics or decommissioning.

    The Ministry of Finance/World Bank study confirms every citizen’s observations that Timor-Leste has paid for many poorly-planned infrastructure projects which are not properly maintained and operated and provide little public benefit. Cancelling this tender would be an important step toward ending this destructive pattern.

    We encourage Timor-Leste not to add more to the 20 million dollars already squandered on the Beaçu LNG dream.  Design and construction of the Beaçu LNG plant will cost billions, not millions, but now is a good time to stop and think.  Some of Timor-Leste’s petroleum-sector leaders have forgotten that every dollar spent on an unproductive mega-project is a dollar exported to foreign companies and no longer available for a sick child, an impoverished farmer or a family which has no clean water and sanitation.

    We realize that we are placing a heavy responsibility on the National Procurement Commission to begin the shift away from a long-established, damaging pattern of behavior. In his inaugural speech, Prime Minister Rui Maria de Araujo said that the new Government would be more “efficient, effective and accountable.” He promised that “We cannot continue allowing waste and the ineffective use of public monies.”

    This is a good place to start.

    Juvinal Dias, Adilson da Costa Jr., Charles Scheiner, Pelagio Doutel, Niall Almond
    La’o Hamutuk Economics and Natural Resources Team

    24 February 2015

    PM Araujo, Recognize falling state revenues when revising the 2015 budget

    On 24 February, La'o Hamutuk distributed a letter to Timor-Leste's leaders, which you can download as a PDF in English or Tetum.  A slightly edited version follows, with added text in brown.
    24 February 2015
    To:    His Excellency Dr. Rui Maria Araujo, Prime Minister of RDTL
    Cc:    Minister of Finance Santina Cardoso, Minister of Planning and Strategic Investment Xanana Gusmão, Members of RDTL National Parliament, President Taur Matan Ruak, Media and public

    Please review revenue projections and total expenditures as you revise the 2015 state budget.


    Dear Excellencies,

    Like everyone in Timor-Leste, we look forward to great things from the Sixth Constitutional Government that was sworn into office last week. The new Prime Minister faces tremendous challenges, and we hope that he and all of us will be able to move this beloved country in a more sustainable, equitable and democratic direction. We are ready and willing to help in this process.

    One of the consequences of restructuring the Government is that the 2015 General State Budget, promulgated less than two months ago, needs to be revised. Certainly, the Rectification Budget will have to shift money from agencies which no longer exist and add lines for new institutions. However, we hope that Government and Parliament will conduct a broader review and make more fundamental changes. As this letter explains, we believe the that revised 2015 State Budget should be based on an Estimated Sustainable Income (ESI) from the Petroleum Fund of $450 million,  with total expenditures of $1,135 million or less.

    Oil prices and revenues have dropped markedly since the budget was prepared.

    When the 2015 budget was proposed to Parliament last October, its petroleum revenue projections were based on price estimates which the U.S. Energy Information Administration had published in April 2014.  At that time, the world market price of a barrel of Brent crude oil was $108. As we all know, prices unexpectedly fell sharply starting in July; the Brent price during January 2015 averaged $48/barrel. It would be foolhardy to continue to budget based on information which is clearly no longer correct.

    According to Book 1 of the 2015 RDTL General State Budget, the Petroleum Revenue forecasts were based on a benchmark price of $108/barrel for 2014, dropping to $90 in 2015 and $87 in 2016. At that time, these lower projections appeared prudent, but subsequent events have shown them to be too optimistic. The average Brent price during all of 2014 turned out to be $99. According to the EIA’s most recent published projections, Brent prices in 2015 are expected to average $58, rising to $75 in 2016.  However, the EIA pointed out that there is “very high uncertainty in the price outlook.” The Petroleum Fund Law requires prudence, and the ESI calculation should use lower prices than the EIA Reference Case. Although there are no official projections for the longer term, we suggest that estimating $40/barrel or lower for 2015 and $45/barrel for subsequent years would be reasonable.

    The Estimated Sustainable Income is the amount which could theoretically be withdrawn from the Petroleum Fund every year, forever, to be replaced by future petroleum revenues and investment returns. Under Timor-Leste’s Petroleum Fund Law, ESI is 3% of the total of the current balance in the Fund and the expected revenues from oil and gas fields with approved development plans, corrected for Net Present Value. Bayu-Undan and Kitan are the only such fields at present.

    According to the Ministry of Finance’s Sensitivity Analysis,  if the Brent price drops by $10/barrel, Timor-Leste’s Estimated Sustainable Income will drop by $25 million. Using our suggested updated price estimates would reduce the ESI by about $125 million.

    After this letter was delivered, we realized that extrapolating the $25m/$10 marginal sensitivity to a much larger oil price drop over-estimates the impact of the price drop. The reduction in ESI is probably closer to $80 million, which would result in a revised ESI of $495 million, and the rest of this article uses this figure.

    Although oil prices fell during the second half of 2014, Timor-Leste’s oil revenues during 2014 totaled $1,816 million, slightly higher than the $1,705 million that had been prudently projected when the budget books were written. This would increase ESI by $3 million.

    On the other hand, ESI should be reduced by $3m because the Government transferred $100m more from the Petroleum Fund in 2014 than the ESI calculation in the 2015 budget expected.

    The rising U.S. dollar and falling oil price have additional effects.

    The fall in the global petroleum price, which has been accompanied by a significant rise in the U.S. dollar relative to currencies in countries Timor-Leste imports from and invests in, has other results which lead us to reduce the state budget:
    • The rising dollar also means that the Petroleum Fund’s investments in non-USD-denominated securities have lost value, as the value of the Fund is calculated in U.S dollars. The Central Bank of Timor-Leste reports that the balance in the Fund dropped by $426 million in 2014 due to these foreign exchange losses, reducing the return on investment earned by the Fund last year by about one-third.  As a result, the Fund earned a nominal return of 3.3% during 2014. After correction for U.S. inflation rates, this is a real return of about 2.5% – less than the ESI formula is based on. This amount of foreign exchange losses would reduce ESI by $13 million.
    • If the oil price remains low, the amount of oil and gas which can be profitably extracted from Timor-Leste’s known reserves will be less. The companies will not find it commercially justifiable to suck up the last drops (which will shorten Bayu-Undan’s life and reduce its total production), and it will be impossible for Timor-Leste to find another company to continue operating the field after ConocoPhillips stops.  Even before the recent oil price drop, the 2014 and 2015 state budgets each projected less production from Bayu-Undan than had been projected in the previous budget, and independent auditors hired by Timor-Leste confirmed ConocoPhillips’ reduced estimates of the recoverable reserve.
    • Oil companies around the world are cutting back investment to explore and develop new fields. On 18 February, Woodside announced that it was suspending work on Greater Sunrise. While this could be a tactic to pressure Timor-Leste to concede on maritime boundaries and floating LNG, it also reflects an industry-wide pattern, responding to reduced income and uncertain future revenues. This will make it even harder to find new commercially-valuable oil or gas deposits in Timor-Leste’s territory, and could further delay the long-promised bidding round for new Production Sharing Contracts.
    However, the rising dollar and falling oil prices also brings some benefits to Timor-Leste, enabling us to save about $110 million when buying goods and services this year:
    • The approved State Budget for 2015 includes $115 million for vehicle and generator fuel. Since the wholesale price of diesel has dropped by nearly half since the budget was prepared, this fuel will cost about $58 million less than was anticipated. The savings can be cut from the budget with no effect on state activities.
    • Approximately 39% of Timor-Leste’s state expenditures purchase goods imported from countries which do not use the U.S. dollar, and another 14% is for imported services. This adds up to about $497 million in non-fuel goods and $22 million in services. The USD-Rupiah exchange rate increased by 10% during the last 12 months, and there have been similar changes in the USD value relative to other countries we import from. Therefore, it will cost about USD $52 million less to purchase the same work and materials than it would have last year.

    A smaller, better government should be less expensive.

    The Sixth Constitutional Government reduced the number of office-holders from 54 to 38. Although this does not mean that the entire Government is now 27% smaller (if it were, this would reduce the budget by $420 million), it will save some money, as a few ministries have been combined and certain offices eliminated.

    During his first speech as Prime Minister, Dr. Rui Maria Araujo said that the new Government would be more “efficient, effective and accountable.” He promised that “We cannot continue allowing waste and the ineffective use of public monies” and stressed how important quality services, discipline, sustainability and integrity will be in the Sixth Constitutional Government.

    Reducing waste and corruption, making the bureaucracy more efficient and requiring more productivity from public servants will enable the entire state apparatus to get more value for money, which is another reason to reduce the total budget. If appropriations are not reduced to prudent and realistic levels, the desire for good budget execution scores will encourage wasteful spending, as it has in the past.

    We also encourage the new Government to take a new look at megaprojects which will cost a few million dollars in 2015 but could cost many billions in future years. Parliament and the public have yet to be told how much Timor-Leste will have to invest to build the components of the Tasi Mane project, the Oecusse Special Economic Zone, Tibar Port, Dili airport and other major public expenditures. We suggest that a thorough review be conducted of these projects, including their full life-cycle costs, benefits and economic viability. Timor-Leste should not commit its people’s money through contracts, loans, or PPP agreements which could obligate the Seventh, Eighth, Ninth and Tenth Constitutional Governments to spend money that we don’t have. La’o Hamutuk has suggested this to Parliament for several years, but perhaps the existence of a new Ministry with responsibility for Planning and Strategic Investment will provide the authority and expertise to carry out such studies. As the new Prime Minister said, “we must invest in a responsible and sustainable manner.”

    During 2013 and 2014, Government transfers from the Petroleum Fund were below the limits set by the Budget Laws. La’o Hamutuk agrees with this, as it is unnecessary (and illegal) to transfer more money from the Petroleum Fund than is required for a given year’s expenditures. This was possible because in 2010-2012 the Government transferred much more from the Petroleum Fund than it was able to spend, accumulating an unreasonably large cash balance of $819 million in the Treasury by the end of 2012, which was spent down to $181 million at the end of 2014. Therefore, this cushion no longer exists. If budget execution rates stay as high as last year’s 93%, new transfers from Petroleum Fund will have to pay for the great majority of state spending in 2015. Timor-Leste transferred $70 million from the Fund already in January 2015 – the first time money has ever been taken out of the Petroleum Fund during the first two months of a fiscal year. 

    Conclusion and recommendation

    The changes to the Estimated Sustainable Income discussed above can be summarized as
        $638 million   Estimated in the current 2015 General State Budget
    -     $80 million    Directly from lower oil prices in the future
    -      $ 3 million    Overspending the 2014 ESI by $100 million
    +      $ 3 million    Oil revenues in 2014 $111 million higher than prudent projections
    -      $13 million    $426 million in foreign exchange losses during 2014 from Petroleum Fund investments
    -      $50 million    Lower future production due to commercial considerations
        $495 million   Revised ESI based on the above discussion.

    Therefore, the rectified 2015 General State Budget should be based on an ESI of $495 million. The original $1,570 million GSB for 2015 would require $1,327 million from the Petroleum Fund, which is $832 million above the revised ESI, more than double the sustainable level and nearly the highest excess transfer in Timor-Leste’s history.

    A sustainable budget would transfer only the ESI from the Petroleum Fund, which would be added to $170 million in domestic revenues and $65 million in loans received. (Although we feel that borrowing is unsustainable and unadvisable, for this discussion we accept additional borrowing for loan-financed projects which have already started.)  This gives a total fiscal envelope of $730 million – less than half of the enacted 2015 budget.

    However, the drop in oil prices and rise in the U.S. dollar also allows some budget changes with no impact on state activities:
    $1,570 million   Total expenditures in current 2015 General State Budget
    -     $52 million    Lower prices on goods and services imported from non-USD countries
    -     $58 million    Lower prices for generator and vehicle fuel
    $1,460 million   Revised state budget with no change in activities.

    It would be traumatic to cut the budget to $730 million this rapidly, so we suggest a less sustainable but more feasible middle ground. On 17 June 2014, the Council of Ministers approved a fiscal envelope of $1,300 million for the 2015 State Budget. Based on the discussion above, the identical amount of goods and services can be purchased today for around $110 million less, and eliminating some agencies and reducing waste should reduce the 2015 budget by at least $55 million more, so a recalculated “Yellow Road” fiscal envelope for 2015 would be under $1,135 million. This still requires transferring $900 million from the Petroleum Fund, which is $405 million over ESI. This overspending will lower ESI by $12 million every year in the future. We hope that future state budgets will be more sustainable.

    Certain sectors have been consistently underfunded in recent state budgets and do not adequately serve Timor-Leste’s young, impoverished and rural population. Therefore, we urge that appropriations for education, health, agriculture and rural infrastructure be maintained, even when the overall budget is reduced. Funding for these sectors is already too low, and we hope that improvements in efficiency and integrity will enable more value for the allocated money.

    In closing, we appreciate that Dr. Rui Maria Araujo pointed out that “The establishment of the Petroleum Fund by the First Government enabled responsible and transparent resource management, for the benefit of current and future generations. It currently holds over $16 billion, which must be protected and invested sustainably.” We hope that the entire Government and Parliament listens to these wise words, and that the revised 2015 State Budget is more consistent with economic realities and sustainable goals than recent ones have been. As always, La’o Hamutuk would like to help.

    Thank you very much for your attention.
    Juvinal Dias, Adilson da Costa Junior, Charles Scheiner, Pelagio Doutel, Niall Almond
    La’o Hamutuk Economics and Natural Resources Team
    ---------------------
    On 9 March, the Ministry of Finance responded to La'o Hamutuk's letter (also Tetum). They explained that they cannot revise the budget "every time" oil prices or exchange rates change (which is not what La'o Hamutuk asked for -- we only suggested that since a budget rectification was happening anyway, the revenue projections be reviewed).

    18 February 2015

    Transparency Initiative gets a little more opaque

    Earlier this month, Timor-Leste published its Extractive Industries Transparency Initiative (EITI) Report for 2012. The report was celebrated by the international EITI Secretariat and the government of Timor-Leste as an advance in public information about oil and gas revenues "including more comprehensive information than ever before." Unfortunately, it is actually a step backwards from the amount of transparency in the 2010 and 2011 reports. Although it has more already-public general information on oil and gas projects in Timor-Leste, it has much less on the specific payments by the companies to Timor-Leste's government, which is the principal purpose of EITI.

    The previous two reports contained more detailed data than the companies wanted, and they were outvoted when the Multi-Stakeholder (companies, government and civil society) Working Group decided to publish them. When the framework for the 2012 report was being discussed, civil society urged that it again be disaggregated by product and revenue stream -- but unfortunately the companies prevailed this time.  At the report's gala launch in Hotel Timor on 6 February, ConocoPhillips representative Jose Lobato was delighted that it responded to company wishes, unlike previous reports. Global EITI Chair Clare Short spoke about how important EITI is in other countries, and how Timor-Leste has been a leader for them.

    Timor-Leste published its EITI report for 2012 five weeks late, according to EITI rules. The latest report contains significantly less information than the 2010 and 2011 reports, with FTP (royalty) combined for all products (gas, condensate and LPG), and each company subsidiary's payments given as one lump sum. In most cases, it contains less revenue data than Timorese agencies had published more than a year ago.

    The 2012 report laments that recommendations in previous reports have not been implemented, including creating a database of companies and conducting a scoping study prior to reconciliation. It makes new recommendations to create a legal framework for EITI in Timor-Leste, add detail to the reporting template, start working on the report earlier, and clarify confidentiality agreements demanded by the companies. Although these recommendations would improve technical implementation, they do not protect transparency.

    The report confirms that oil companies paid $266 million to Timor-Leste in 2012 for taxes due in prior years and associated penalties. These are being appealed, and Timor-Leste may have to return this money (and perhaps more) if the companies continue to prevail.

    The two graphs which follow are based on information published by the National Petroleum Authority, Central Bank and Ministry of Finance. That data is not in the latest EITI report, which only covers 2012 and has no monthly data, revenue source breakdown or production information. We appreciate that Timorese agencies remain more transparent than EITI on oil and gas receipts.

    Timor-Leste's petroleum revenues peaked in 2011 and 2012. They dropped 15% in 2013 and 42% further in 2014. Although some of the 2014 decline was due to world market prices, a more important factor was the 24% drop in production because the fields are being exhausted. Bayu-Undan and Kitan have less than five years of production remaining.

    Timor-Leste has saved more than $16 billion of its oil and gas revenues in its Petroleum Fund, but, for the first time in the country's history, the balance in that Fund fell during the last half of 2014. Celebrating two-year-old EITI data ignores this disturbing reality. 

    During the past year, Timor-Leste's government has reduced publicly available information regarding procurement, macroeconomics, poverty and other areas. We hope that the new Prime Minister and Minister of Finance will reverse this trend, but it will be a struggle. La'o Hamutuk recently published an article with some lessons based on TL's experience.

    The international EITI article expects that the 2012 EITI report "will catalyse fresh investment for exploration and production in [an] upcoming bidding round" for offshore oil and gas exploration blocks. However, Timor-Leste officials have promised a bidding round for "the coming year" since at least 2010; the last one was in 2006. Although it is possible that Timor-Leste's constrained land and sea territory contain significant undiscovered reserves, it is unlikely. Clearly, it would be foolhardy to base hopes for future development in this extremely petroleum-export-dependent country on the faint chance that large deposits were missed during decades of seismic exploration and dozens of dry test wells already drilled. Today's news that Woodside is suspending work on Greater Sunrise should be a signal to everyone.

    Inisiativa transparénsia ne’ebé sai nakukun uitoan

    Iha inísiu fulan ida-ne’e, Timor-Leste publika relatóriu Inisiativa Transparénsia ba Indústria Ekstrativas (EITI/ITIE) ba tinan 2012 nianSekretariadu Internasional ITIE no governu Timor-Leste selebra relatóriu ida-ne’e hanesan avansa boot iha informasaun públiku kona-ba reseitas husi mina no gas. Sira temi katak relatóriu ida-ne’e “inklui informasaun ne’ebé kompletu liu, kompara ho hirak ne’ebé halo tiha ona iha pasadu”.  Maibé iha realidade, relatóriu ne’e hatudu katak Timor-Leste marka pasu ida ba fali kotuk, haree husi valor transparénsia husi relatóriu tinan 2010 no 2011 nian. Maski relatóriu ne’e hato’o informasaun jerál kona-ba projetu sira mina no gas nian iha Timor-Leste ne’ebé fó sai ba públiku tiha ona, informasaun espesífiku kona-ba pagamentu husi kompañia sira ba governu Timor-Leste, ne’ebé sai nu’udar objetivu prinsipál husi ITIE nian, uitoan liu.

    Relatóriu rua molok ne’e fahe dadus ne’ebé detallu liu maski kompañia sira lakohi ida-ne’e. Iha enkontru Grupu Trabalhu (Multi-Stakeholder Working Group) nian (kompostu husi kompañia sira, governu no sosiedade sivíl) iha tempu ne’ebá, kompañia sira lakon iha votus atu deside publika detallu sira ne’e. Iha diskusaun ba kuadru relatóriu 2012 nian, sosiedade sivíl ezije atu dala ida tan halo separasaun bazeia ba produtu no tipu reseitas iha relatóriu ida-ne’e -- maibé kompañia sira mak manán iha diskusaun ne’e. Iha eventu lansamentu relatóriu ida-ne’e, ne’ebé halo iha Hotel Timor iha loron 6 fulan Fevereiru, reprezentante ConocoPhillips nian, José Lobato, hateten nia kontente tanba relatóriu ida-ne’e tuir duni buat ne’ebé mak kompañia hakarak, la hanesan ho relatóriu sira seluk ne’ebé halo ona. Prezidente ITIE Global nian, Clare Short, ko’alia kona-ba importánsia husi ITIE ba nasaun sira seluk, no Timor-Leste durante ne’e sai ona hanesan lider ba nasaun sira ne’e.

    Publikasaun relatóriu ITIE tinan 2012 nian ne’e, se tuir duni regulamentus ITIE nian karik, relatóriu ne’e tarde semana lima ona. No relatóriu ida-ne’e inklui informasaun ne’ebé menus liu kompara ho relatóriu husi 2010 no 2011. Iha relatóriu ida-ne’e, FTP (royalty) ne’ebé kompostu husi produtu hotu (hanesan gas, mina kondensadu no LPG), kompañia subsidiariu ida-idak relata ho montante ida de’it. Wainhira halo hanesan ne’e, dala barak fó dadus reseitas nian ne’ebé uitoan liu kompara ho saida ma, órgaun Timor-Leste nian publika ona tinan kotuk.

    Relatóriu 2012 nian ne’e triste kona-ba rekomendasaun sira ne’ebé halo ona husi relatóriu sira iha pasadu, tanba seidauk implementa. Rekomendasaun sira ne’e mak hanesan atu kria báze-de-dadus ida kona-ba kompañia sira no halo estudu ida molok halo rekonsiliasaun. Relatóriu ITIE 2012 nian fó rekomendasaun foun hanesan; atu kria kuadru legal ida ba ITIE iha Timor-Leste, atu aumenta detallu iha formuláriu ne’ebé kompañia sira tenke prenxe, atu komesa prepara relatóriu ne’e sedu liu, no atu klarifika akordu konfidensialidade nu’udar kompañia sira husu. Maski rekomendasaun sira ne’e karik bele hadi’ak implementasaun iha parte téknika, maibé sira ne’e la fó protesaun ba transparénsia.

    Iha relatóriu ida-ne’e konfirma katak kompañia mina sira selu tokon $266 ba Timor-Leste iha tinan 2012 atu kobre taxa sira husi tinan sira ne’ebé liu ba no multa sira ne’ebé kompañia sira tenki selu. Hirak ne’e, oras ne’e daudaun kompañia lori kazu balun ba aprezenta hela iha tribunal arbitrajen iha Singapura, no Timor-Leste karik tenke fó fila fali osan ida-ne’e (no bele liu tan) se kompañia sira kontinua atu manán.

    Gráfiku rua tuir mai ne’e bazeia ba informasaun ne’ebé publika husi Autoridade Nasionál Petróleu, Banku Sentrál no Ministériu Finansas. Dadus ida-ne’e la inklui iha relatóriu ikus husi ITIE nian, ne’ebé kobre de’it ba tinan 2012 no la inklui dadus mensal, ka detalhu husi fontes reseitas, ka informasaun kona-ba produsaun. Ami apresia katak ajénsia Timor-Leste nian ne’e transparente liu kona-ba reseitas mina no gas, kompara ho ITIE.

    Reseitas petrolíferu to’o ninia másimu iha 2011 no 2012. Iha tinan 2013 tun 15%, no iha 2014 tun 42% tan. Maski iha 2014 fatór ida ne’ebé afeta hodi halo reseitas tun ne’e mak hanesan folin mina mundiál ne’ebé tun, fatór seluk ne’ebé importante liu mak produsaun ne’ebé monu 24% tanba kampu mina sira komesa atu maran ona. Bayu-Undan ho Kitan iha rezerva ne’ebé ninia produsaun sei dura la to’o tan ba tinan lima.

    Timor-Leste rai ona liu billaun $16 husi reseitas mina no gas ninian iha Fundu Petrolíferu, maibé, ba dala uluk iha istória nasaun ida-ne’e nian, balansu Fundu ne’e monu iha trimestre rua ikus iha tinan 2014. Wainhira selebra dadus ITIE nian ne’ebé tinan rua tarde ona ne’e ignora tiha realidade ne’e, ne’ebé tuir loloos tenke sai preokupasaun boot.

    Iha tinan kotuk, governu Timor-Leste hamenus informasaun sira ne’ebé públiku bele asesu inklui informasaun kona-ba aprovizionamentu, makroekonómiku, pobreza no asuntu seluk tan. Ami hein katak Primeiru Ministru no Ministra Finansas foun bele halo mudansa ba tendénsia ida-ne’e, maibé ne’e karik sei susar uitoan. La’o Hamutuk foin lalais ne’e publika artigu ida kona-ba lisaun balun husi Timor-Leste nia esperiénsia.

    Artigu husi ITIE internasionál ne’e espera katak relatóriu ITIE 2012 “sei aselera investimentu fresku ba esplorasaun iha prosesu tenderizasaun nian ne’ebé sei halo iha tempu badak” ba rikusoin potensiál mina no gas iha tasi laran. Ofisiál sira Timor-Leste nian promote ona prosesu tenderizasaun sei halo “iha tinan oin” maibé promesa ida-ne’e halo hahú kedas iha tinan 2010 to’o agora; tenderizasaun ikus liu mak iha tinan 2006. Maski karik iha posibilidade katak Timor-Leste iha rezerva komersiál iha territóriu rai maran no tasi laran ne’ebé seidauk deskobre, maibé ne’e improvavel. Klaru katak ladún matenek atu bazeia planu ba dezenvolvimentu sira iha futuru nian iha nasaun ida-ne’e - ne’ebé iha dependensia boot liu ba esportasaun petróleu, ba rezerva mina-rai. Iha posibilidade ne’ebé ki’ik teb-tebes katak rezerva boot sira ne’e seidauk hetan wainhira ita halo ona peskiza durante tinan barak no posu atestadu lubuk ida ne’ebé halo ona la hetan rikusoin ho montante komersiál. Notisia semana ida ne’e katak Woodside suspende servisu iha Greater Sunrise tenke sai nu’udar sinál ida ba ema hotu.