Petroleum Fund reached U.S. $10 billion two months ago, the unspent part of $13.3 billion which has been deposited into the Fund since it started in 2005. The graph at right (click on it to see it larger) has colored bars in the same sequence as the key above it and the list below. It shows where the money came from, in millions of US dollars not adjusted for inflation:
$ 829m return on investing the Petroleum Fund
$ 8m interest paid to ANP for delayed "profit oil" payments
$ 5,155m taxes paid by petroleum companies
$ 6,022m "profit oil" additional royalties from Bayu-Undan
$ 24m royalties from Kitan oil sold at sea
$ 277m royalties from Bayu-Undan gas (LNG piped to Darwin)
$ 736m royalties from Bayu-Undan oil sold at sea
$ 32m royalties from Elang-Kakatua oil sold at sea
Natural gas from Bayu-Undan is piped to Australia, where it is liquified and shipped to Japan. The money paid by Japanese buyers, which is linked to world market oil prices, is reflected in payments from the pipeline/LNG plant to the Bayu-Undan Joint Venture, and in royalties those companies then pay to Timor-Leste (90%) and Australia (10%).
Kitan reserves are used up, production and revenues will decline. The graph at right uses oil price and inflation predictions used by Timor-Leste's Ministry of Finance, and shows that our total oil and gas reserves are only enough to support half the current level of State spending.
blog entry. Some people thought that our assumptions in that blog were too conservative, so we redid the calculations with more optimistic (less prudent) estimates of future oil prices. The graph at right, based on the most recent "Reference case" projections from the U.S. Energy Information Administration (EIA), shows that the Petroleum Fund could be empty by 2023. That is five years later than recent policies would cause. However, the increased oil price projections over the conservative ones (average of EIA Low and Reference cases) used by the Ministry of Finance to calculate Timor-Leste's Estimated Sustainable Income extends the Petroleum Fund by only two years.
It will be difficult to avoid this disaster, but it is not impossible. Citizens, Government and development partners should work together to:
- Reduce growth in State expenditures, ensuring that money is spent wisely on activities that will produce a return to Timor-Leste's people.
- Invest in our people -- health care, education, sanitation, water, rural roads -- rather than in large, showy infrastructure mega-projects which mainly benefit foreign contractors and a few rich people.
- Strengthen our non-oil, productive economy, especially agriculture and light industry, to reduce dependence on imports and provide livelihoods and necessities for our people after the oil money is gone.
- Take responsibility for our own development, rather than relying on foreign investors, lenders, international oil companies, visitors, and imported goods, services and expertise. These send our money and our non-renewable resource wealth out of Timor-Leste, squandering our petroleum birthright and leaving little to show for it.