Oil and finance professionals are invariably optimistic, and we hope that they are right that oil prices will rise again, the stock market will improve, and the U.S. dollar will stabilize against other currencies. If this happens, the Fund's balance will decline more slowly. However, it will only begin to increase if politicians are brave and far-seeing enough to sharply curtail public spending on wasteful mega-projects with dubious benefits -- a change of direction not visible in current planning.
In fact, even this may be too hopeful. According to the latest reserves statement from Santos, a partner in the Bayu-Undan project, 93.3% of Bayu-Undan's 'Proved' deposits have already been extracted. Timor-Leste's other recently producing field, Kitan, is already shut down. Although Greater Sunrise may rise some day, the unpredictability of boundary disputes, floating/pipeline obstinacy and dubious profitability could take decades to resolve.
By then, our Petroleum Fund may no longer exist. If we continue to accelerate state spending, hiding the full costs by borrowing, where will the money to repay the debts come from? How will we maintain our nice new roads and airports? More importantly, will teachers, doctors, police and civil servants continue to serve the public when there is no money to pay them?
La'o Hamutuk has warned about Timor-Leste's fundamental fiscal fragility for several years, and we are gratified and saddened to see evidence from many sources confirming our dire predictions.
But decision-makers' heads remain in the sand. What will it take to make them look around, to see beyond next week or the next election? When will they realize that more than a million people, not only their cronies or interest groups, depend on them to advance equitable and sustainable development?
Furthermore, drilling these new wells will cost many millions of dollars. This cost is 'recoverable' from Bayu-Undan production -- so most if it will be subtracted from revenues which would have come to Timor-Leste.
We do not know if articles like this result from ANP obfuscation or journalistic incompetence, but it's no wonder that the newspaper-reading public is confused. Hopefully their leaders know better.