Economics of Education / Ekonomiku Edukasaun nian

Tetum iha kraik

On 4 March 2020, the Institute Of Business and Monash University hosted a public discussion on “The Economics of Education”. Monash Professor Brett Inder presented his research findings, and the responding panel included Rui Gomes (also article), Berta Antonieta of La’o Hamutuk, Jose Monteiro of the Timor-Leste Coalition for Education, and IOB Professor Pedro Ximenes. (Click on each name to download their presentation.)

All presenters agreed that the government should invest more in education in Timor-Leste. Brett and Rui both discussed the financing of the education itself, and how investing in education will create human capital, resulting in economic benefits. Rui also discussed how Timor-Leste falls behind in international standardized tests, while Brett explained equity in access to education – that education is not only a classroom experience, and that unequal access results from parents’ income and location. Berta explained that education is not only to produce human capital and employment, but also improves the quality of people’s lives. The government should repair infrastructure, train teachers, and improve the curriculum. From her personal experience in a small class with only 20 students; with well-trained teachers in adequate infrastructure, these improvements would bring Timor-Leste up to international norms.

Ministries of Education have already made progress, especially by using Tetun as the language of instruction and curriculum. However, Timor-Leste’s investment in education remains at half the level of similar countries.

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Iha 4 Marsu 2020, Institutu Bisnis (IOB) no Universidade Monash organiza diskusaun públiku kona-ba “Ekonomia Edukasaun nian”. Professor Monash nian Brett Inder halo aprezentasaun ba nia rezultadu peskiza, no panel responde ba tópiku refere, konsiste husi Rui Gomes (ho palestra), Berta Antonieta husi La’o Hamutuk, Jose Monteiro husi Koligasaun ba Edukasaun iha Timor-Leste no Pedro Ximenes Professor husi IOB. (Bele kliik iha sira nia naran ne’e hodi download aprezentasaun sira nian.)

Aprezentadór hotu-hotu konkorda katak governu presiza investe iha edukasaun iha Timor-Leste. Brett no Rui diskute kona-ba finansiamentu husi edukasaun no oinsá investe iha edukasaun bele kria kapitál umanu, no bele hamosu benefísiu ekonómiku. Rui mós diskute oinsá Timor-Leste nia valór ki’ik liu uainhira foti padraun teste international sira, no iha tempu hanesan Brett esplika katak asesu ba edukasaun hanesan ekidade ida, edukasaun la’ós iha klase laran de’it no dezigualdade asesu ba edukasaun mosu depende ba inan aman nia vensimentu no fatin jeográfiku. Berta esplika katak, edukasaun la’ós atu prodús kapitál umanu no servisu ho saláriu de’it, maibé mós aumenta kualidade ema moris nian. Governu presiza hadi’a infrastrutura, fornese formasaun ba manorin sira, no hadi’ak curriculum. Husi nia esperiénsia rasik, klase ho estudante na’in 20, manorin na’in ne’ebé hetan formasaun metin iha infrastrutura ida metin, buat hirak ne’e bele foti Timor-Leste hodi bele kompete iha teste padraun internasionál sira.

Ministériu Edukasaun sira halo ona progresu balun, liuliu iha uza Tetun hanesan lingua manorin no uza iha kurríkulu. Maske nune’e, Timor-Leste nia investimentu iha edukasaun nafatin sorin balun de’it kompara ho nasaun ne’ebé hanesan.

Global economic developments hit Timor-Leste hard

Download English PDF of this article ka verzaun Tetum husi iha ne'e

See updates through 1 June below, with current graphs.

Since 2015, Timor-Leste’s state revenues have depended on income earned from investing the money saved in the Petroleum Fund, rather than on royalties and taxes from extracting and exporting oil and gas.

In this investment-dependent condition, La’o Hamutuk decided to look into how global economic and financial market changes will affect the financial capacity and stability of Timor-Leste’s government operations. Although we cannot influence these events, we need to understand them.

This article is a preliminary analysis of how recent changes – from 12 February to 12 March 2020 – are impacting our Petroleum Fund (PF).

Falling equity prices

Equity (stock) markets in the U.S. and other countries dropped about 26% during the last 30 days. The PF owned about $6.6 billion in equities at the end of 2019. Therefore, we have lost about $1.7 billion in the market value of our stocks. However, the market is very volatile, and we do not need to sell our stocks right now. If the market bounces back (as it did in 2019), we will lose less money, but if it continues to fall (as it did in 2008), we could lose a lot more.

Timor-Leste’s Petroleum Fund was the only one in the world which didn’t lose money during the 2008 global economic crisis, because we were not invested in stocks. (Norway lost about $90 billion.) In 2010, when the Petroleum Fund Law was being revised to allow more of the Fund to be used to buy stocks, La’o Hamutuk asked "How will Timor-Leste’s Government respond to opposition and public concern when the principal of the Petroleum Fund loses value due to market forces outside their control, or because of a poor decision by an external manager? How can we make sure that we don’t buy when prices are high and sell when they are low?"

Even if we don’t sell the stocks, the balance in the PF is used to calculate the Estimated Sustainable Income (ESI) guideline for how much can be withdrawn sustainably from the Petroleum Fund. A fall of $1.7 billion in the Fund’s balance reduces ESI by $51 million – about twice as much as the State spends on agriculture every year.

Falling interest rates

Most of the Petroleum Fund is invested in government bonds, including $7.9 billion (as of the end of 2019) in those issued by the United States Treasury, and $1.6 billion in other countries.  Yield rates of medium-term U.S. bonds have dropped to less than half of their previous levels. Last year, the Petroleum Fund received $420 million in interest and dividends, and this could drop to $200 million if rates stay where they are.  If they fall further, Timor-Leste will receive even less in interest and dividends.

Falling oil prices

Although oil and gas exports are no longer Timor-Leste’s main source of income (and may end entirely in about three years), the Fund still receives some revenue from them. Last year, the Ministry of Finance projected that oil and gas revenues in 2020 would be $595 million, based on an expected Brent oil price of $62 per barrel. However, on 13 March the price was $33. If prices stabilize at around $35, petroleum revenues in 2020 will be less than half of what the Ministry projected, and the ESI would drop by about $12 million. If they fall further, the impact will be even more severe.

Low oil prices will restrict petroleum development across the globe, including in Timor-Leste. If they stay low, projects will be less profitable for companies, and Bayu-Undan could stop production even earlier than 2022, as is currently planned. (This happened with Kitan in 2015.)

Companies and investors will reassess the economics of every future project – including on-shore exploration, Buffalo, Chuditch, Greater Sunrise and Tasi Mane – possibly leading to delays or cancellations. The bidding round that ANPM is currently conducting may attract less interest, because companies hesitate to embark on or invest in new projects when they are uncertain that they will make money.

Conclusion

If the prices and interest rates discussed above don’t get any worse (or better) during the rest of this year, by the end of 2020 Timor-Leste’s Petroleum Fund’s investments will have a net loss of about $1.5 billion, more than two billion lower than the $640 million gain the Ministry of Finance estimated in the proposed 2020 budget. In addition, oil and gas royalties and taxes will be $300 million less than the Government ‘prudently’ projected. The losses could continue in future years.

Last year, La’o Hamutuk projected that the Petroleum Fund could be empty by 2028, even if it is not used to pay capital costs of the Tasi Mane project. If current global trends persist, this will happen several years sooner.

The outgoing VIII Government intends to withdraw $250 million from the Petroleum Fund because the machinery of the state cannot continue to function without it. Since January (as in 2018), slower state spending has weakened Timor-Leste’s entire economy, making poor people even poorer. This reduced economic activity underscores how much our population depends on the state spending money from the Petroleum Fund – and how weak the rest of our economy is.

The recent threats to the Fund’s medium-term survival are not new, and could become even worse due to climate change and the reduced balance in the Fund. They remind us that Timor-Leste urgently needs to diversify its economy away from petroleum and investments. It is long past time to invest in our children’s health and education so that our productive, sustainable and equitable economy – agriculture, light industry and eco-tourism – can enable our people to survive and thrive. That is the only way to achieve the Petroleum Fund’s promise to benefit future generations.

Update, 14 March 2020

The above article was written on 13 March 2020, based on prices and yield rates at the close of business on Thursday 12 March. The following day, all three indices used in these calculations improved, and the drop in Petroleum Fund revenues became $1.8 billion, less than the $2.3 billion loss we calculated the day before. These numbers will change every day, and could get better or worse. The data is available at:

• S&P 500 Stock Market Index (2,711 on 13 March): https://www.marketwatch.com/investing/index/spx/charts
• U.S. Treasury Bond Yields (0.74% on 13 March): https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
• Brent oil price ($34.69 on 13 March): https://www.exchangerates.org.uk/commodities/live-oil-prices/BRT-USD.html

Update, 31 March 2020

The end of the month was the end of the quarter, the worst for the U.S. stock market since 2008. The situation for the Petroleum Fund got much worse around 23 March, but recovered slightly by the end of the month, to about the same level as when the article above was originally written. If things stay unchanged for the rest of 2020, the Fund's balance at the end of the year will be about $1.9 billion less than was expected at the beginning of the year. (The previous article used 12 February as a reference; from that starting point the lost income is about $2.1 billion.)

The monthly BCTL report for February showed a drop in the Fund balance of $344 million during that month. Although the March report is not yet released, La'o Hamutuk estimates that it will show a further drop of $500 million.

For Timor-Leste, the continuing fall of the oil price is a more lasting worry, and many experts expect it to drop well below $20/barrel. Bayu-Undan's remaining revenue in 2021-2023 will be much less than the $260 million that has been projected. For the longer term, other petroleum projects on the drawing board -- including Buffalo, onshore, Chuditch and Greater Sunrise -- may not be profitable enough to justify the capital investment, and may not happen at all, as many other oil projects and contracting rounds around the world are being cancelled.

Update, 1 May 2020

During April, the U.S. stock market had its strongest month in 33 years, recovering about 60% of its losses between mid-February and the third week of March.

Oil prices and interest rates on U.S. bonds fell only slightly during April. If things stay as they were on April 30 for the rest of 2020, the Fund’s balance at the end of the year will be about $1.25 billion less than was expected at the beginning of the year.

The Petroleum Fund Balance at the end of March was $17.03 billion, a drop of $476 million during the month, and $663 million lower than at the beginning of 2020. No money was withdrawn in March. Although the balance went up to $17.60 billion in April, gains were limited by a $250 million withdrawal to finance the Covid-19 Special Fund and regular government operations.

Here’s how the components of the calculations in this blog did during the first four months of 2020. Although the stock market has recovered from its lowest point, it is still very volatile and could fall further, as the Covid-19 pandemic will continue for months.

For Timor-Leste, the continuing erratic drop in the oil price is a more lasting worry, and many experts expect that it could stay at or below $20/barrel for months or years. Bayu-Undan’s remaining revenue in 2021-2023 will be much less than the $260 million that had been projected. For the longer term, petroleum projects on the drawing board -- including Buffalo, onshore, Chuditch and Greater Sunrise -- may not be profitable enough to justify their capital investment and may not happen at all; similar projects around the world are being cancelled. The Petroleum Fund’s $650 million loan so that TimorGAP could buy participation in Greater Sunrise, which is still counted in its balance, may never be repaid.

In addition, many countries are extending or delaying their bidding rounds for new oil and gas exploration, although ANPM still hopes to get bids before October.

The Petroleum Fund balance will fall far in 2020 -- from negative investment returns and from extraordinary withdrawals to cope with the pandemic -- and there may not be any more petroleum revenues to replenish it. How will Timor-Leste finance its government after things return to “normal”?

Update, 1 June 2020

During May, the U.S. stock market continued to improve, in spite of major problems in the U.S. and global economies. Oil prices also recovered a little, although they remain about half of what they were at the start of the year. Interest rates on U.S. Treasury Bonds dropped slightly during the month. As the economic impacts of the pandemic are far from over, analysts worry that the rebound might not continue.

Prémiu Solidariedade ba Saskia / Solidarity Prize to Saskia

Komité Popular fó Prémiu Solidariedade ba Saskia!

[English follows below]

Dia 10 Setembru 2019, Komité Popular ne’ebé organiza Konferénsia Solidariedade iha dia 27,28 no 29 Agostu 2019, oferese Prémiu Solidariedade ba mana Saskia Kouwenberg ba kontribuisaun boot ne’ebé nia halo ona ba Rai Doben Timor-Lorosa’e. Prémiu Solidariedade ne’e entrega husi Irma Maria de Lourdes Martins Cruz “Mana LU” no Prezidente Komité 12 Novembru Sr. Gregório Saldanha iha Balide, Centro Nasional Chega!

Nudár ema barak hatene, mana Saskia mak lori sai ba rai li’ur filmajen ne’ebé Jornalista Max Stahl halo ba masakre Santa Cruz iha tinan 1991. Mana Saskia lori filmajen ne’e ho maneira barani no determinadu tebes, ikus mai filmajen ida ne’e konsege loke koñesimentu iha nasaun barak no muda prioridade povu no nasaun boot nian kona-ba Indonézia no loke dalan ba Timor-Lorosa’e nia libertasaun.

Mana Saskia mós ativista solidariedade ne’ebé apoiu Timor-Leste ba tinan barak, iha Australia no Netherlands. No mós koordenadóra iha ba Projetu Observadór husi International Federation for East Timor (IFET-OP) iha 1999, Mana Saskia sempre hamriik hamutuk iha povu Timor-Leste nia sorin hamutuk ho kolega solidariedade sira seluk durante tinan barak hodi luta ba auto determinasaun rai doben nian.

Hafoin Konsulta Popular mana Saskia mós involve iha konsultasaun, peskiza no diskusaun sira atu harii organizasaun La’o Hamutuk iha tinan 2000.

Obrigadu barak, mana Saskia, kolega Solidariedade Internasionál tomak, ita-boot sira sempre hetan fatin iha uma Timor-Leste nian. Defende nafatin justisa no solidariedade Umana iha mundu rai Klaran!

As Lutas Kontinuam!

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People’s Committee gives Solidarity Prize to Saskia

On 10 September 2019, the People’s Committee which organized the Solidarity Conference on 27-29 August offered the Solidarity Prize to Saskia Kouwenberg for her huge contribution to the beloved land, Timor-Leste. The Prize was presented by Sr. Maria de Lourdes Martins Cruz “Mana LU” and the President of the 12 November Committee, Mr. Gregório Saldanha at the Centro Nasional Chega! in Balide.

As many people know, Saskia was the one who brought the film of the 12 November 1991 Santa Cruz massacre, made by journalist Max Stahl, to the rest of the world. Saskia’s determined and courageous carrying the film awakened many people worldwide to the reality of Indonesia’s occupation, moving national priorities and opening the way for Timor-Leste’s liberation.

Saskia was a solidarity activist who supported Timor-Leste for many years, in Australia and the Netherlands, and was a coordinator of the International Federation for East Timor Observer Project (IFET-OP) in 1999. Saskia always stood together with the Timorese people, alongside other solidarity friends, in the long struggle for this country’s self-determination.

After the 1999 Referendum, Saskia was involved in the consultations, research and discussions which led to the formation of the La’o Hamutuk organization in 2000.

We greatly appreciate mana Saskia and all international solidarity colleagues. You will always have a home in Timor-Leste. Continue to defend justice and human solidarity throughout the world!

The struggles continue!

Konvite ba Konferénsia Solidaridade no Espozisaun Fronteira Maritima

Konvite ba públiku, kona-ba Konferénsia Solidariedade no Espozisaun kona-ba Fronteira Maritima

English translation below

Loron 30 Agostu 2019, mak marka kompletamente tinan 20 Konsulta Popular, ida ne’ebé Povu Timor-Leste barani hasai obrigatóriu Indonézia nia militár husi Timor liu husi votasaun. Ikus mai Timor-Leste atinje ukun rasik an hafoin luta naruk no sofrementu oin-oin.

Grupu sosiedade sivíl no Movimentu Kontra Okupasaun Tasi Timor-MKOTT sei komemora konsulta popular no selebra vitória luta ba Fronteira Maritima.

Sei realiza Konferénsia Solidariedade iha dia 28 no marxa iha dia 29, ne’ebé sei diskute asuntu esensiál sira relasaun ho auto determinasaun no justisa sosiál (video).

MKOTT mós sei realiza espozisaun ida hodi selebra ba vitória no refleta fali luta naruk ne’ebé Povu Timor-Leste liu hodi buka Fronteira Maritima entre Australia no Timor-Leste. Ami enkoraja atu ema hotu bele mai partisipa iha Konferénsia no bele mai vizita espozisaun MKOTT nian iha Asosiasaun HAK, Farol, Dili.

MKOTT mós fa’an faru ne’ebé hakerek Solidariedade ba belun di’ak Bernard Collaery no Witness K, ita-boot sira bele sosa ho $20, nudár kontribuisaun ba MKOTT hodi selu ba nesesidade sira espozisaun nian no servisu sira seluk ne’ebé MKOTT presiza halo tan.

Obrigadu barak. Bele liga ba; Celestino Gusmão: 77432621

Invitation to the public to Solidarity Conference and Exhibition about Maritime Boundaries

30 August 2019 marks the 20th anniversary of the Popular Consultation (referendum), in which the people of Timor-Leste bravely voted to force the Indonesian military occupation to leave. At last, Timor-Leste achieved independence after a long struggle and much suffering.

Civil Society groups and the Movement Against the Occupation of the Timor Sea (MKOTT) will commemorate the Popular Consultation and celebrate the victory in the struggle for a maritime boundary.

There will be a Solidarity Conference on 28 August and a march on 29 August, with discussion of essential issues related to self-determination and social justice.

MKOTT is also holding an exhibition to celebrate the victory and reflect on the long struggle through which the people of Timor-Leste achieved a maritime boundary between Australia and Timor-Leste. We encourage everyone to participate in the conference and to visit MKOTT's exhibition at the HAK Association in Farol, Dili.

MKOTT is also selling T-shirts to express solidarity with our good friends Bernard Collaery and Witness K. You can buy them for $20, as a contribution to MKOTT which will help pay for the exposition and other work.

Thank you very much.

Misinformation and facts about the Greater Sunrise project

Liga ba blog ne'e iha Tetum.       Download a version of this article as a PDF file.

At the end of September 2018, Timor-Leste and ConocoPhillips announced that the company will sell its 30% share of participation in the Greater Sunrise Joint Venture to Timor-Leste for $350 million. A month later, Shell agreed to sell its 26.56% share for $300 million more. Timor-Leste is debating laws and budgets to implement these transactions.

These events have stimulated a lot of talking and writing by journalists, leaders and experts. Unfortunately, much of the commentary has included inaccurate context and factual errors. La’o Hamutuk is publishing this list of common misunderstandings, with relevant facts, to help people understand the issues better. We hope that it will also improve the accuracy of future reporting.

For additional, regularly updated, information about the Sunrise project and Timor-Leste’s participation, see http://www.laohamutuk.org/Oil/Sunrise/18SunriseBuyout.htm. This blog was updated on 6 March 2019.

Misunderstanding	Actual reality
Timor-Leste is buying shares (or stock / ações / asaun) in ConocoPhillips and Shell.	The companies agreed to sell their ownership of parts of the Sunrise Joint Venture to Timor-Leste. This kind of deal is common in the petroleum industry. However, part of a joint venture is not the same as shares of a company’s stock, which can easily be resold and don’t involve additional obligations. Participants in a joint venture such as this commit to invest billions of dollars more and are responsible for managing the project. Changes in ownership must be approved by other participants. The world contains many prospective petroleum projects which are likely to be more profitable than Greater Sunrise, and experienced, legitimate companies may choose to invest elsewhere unless special incentives are offered to buy into the Sunrise project.
The deals show that the companies trust Timor-Leste’s capability to carry out the Sunrise project.	Shell and ConocoPhillips will no longer be involved in Sunrise. They are happy to receive Timor-Leste’s money in return for pulling out of a project that will not be developed in ways they believe are the most profitable.
A pipeline from Sunrise to Beaçu is not technically feasible.	Although this may have been true 15 years ago, today everyone agrees that it is possible to run an undersea gas pipeline across the deep, steep Timor Trench between Sunrise and Beaçu. However, it is likely to be more expensive and riskier than other development models.
There is no need to analyze or compare alternative development options for Sunrise.	La’o Hamutuk believes that Sunrise development should maximize the benefits for Timor-Leste’s people, while minimizing costs and risks, and all possible options should be compared by independent experts, leading to a decision based solely on economics, not politics or ideology. Proponents of the pipeline to Beaçu have not released (or not done) recent comparisons of it with other options, such as a pipeline to the existing Darwin LNG plant or floating LNG.
Timor-Leste’s investment in this project will be $650 million.	Participants in a joint venture are responsible to pay their portion of the capital and operating costs of the project, in return for receiving part of the profits. In addition to the $650 million to buy 56.56% participation, Timor-Leste will have to invest more than $10 billion to enable Sunrise oil and gas production.
Changes to legislation are required for these deals to move ahead.	The Sunrise buy-in could proceed under existing law, without amending Petroleum Activities Law 13/2005.
The President vetoed participation in the Sunrise project.	The President did not veto participation in the joint venture, as this was not in the legislation presented to him. The vetoed law amending Petroleum Activities Law 13/2005 includes a clause allowing the Petroleum Fund to be directly invested in TimorGAP, which contradicts Petroleum Fund Law 9/2005 (as amended in 2011). However, Parliament overrode the veto, the President promulgated the law, and it is being challenged in court. However, there are other ways to finance the project, including through the State Budget. The 2019 budget originally passed by Parliament included $650 million to purchase participation, but it was vetoed by the President, and Parliament removed the allocation before final approval and promulgation. No legislation to finance the billions in additional investment that the Sunrise project will require has been submitted.
An amendment to the Petroleum Activities Law is needed to allow Timor-Leste to own more than 20% of a petroleum project.	TimorGAP already owns 50% of two onshore Production-Sharing Contracts (PSCs), 100% of offshore PSC S0-15-01, and 24% of PSC JPDA 11-106. Existing law does not prevent Timor-Leste from owning 30% or more of Sunrise, as the 20% limit does not apply to purchased participation.
It requires two-thirds (44 Members) or a majority (33 Members) of Parliament to override a Presidential veto.	This is subject to debate; the Constitution is ambiguous as major issues require 2/3 of those present, while others require an absolute majority of Parliament. On 10 January, 41 Members of Parliament voted to override the President’s veto of the amendment to the Petroleum Activities Law (only one voted against, as Fretilin walked out). Although the President subsequently promulgated the law, its legality and constitutionality is being challenged in court.
The purchase agreements are too complicated to be evaluated by the Audit Chamber of the Appeals Court (Camara da Contas).	The proposed legislation removes all petroleum-related contracts and other related legal documents from prior review by the Audit Chamber, forever. It is not limited to purchase agreements, or to Sunrise, and could also apply to financing agreements for any petroleum-related project. In December, Special Representative Xanana Gusmão told the GMN-TV audience that the purchase agreements are too complicated for the Audit Chamber to understand, and that Timor-Leste should trust the undisclosed “Due Diligence” reports by PriceWaterhouseCoopers (PWC). La’o Hamutuk believes that the agreements’ cost and complexity is exactly why transparency, checks and balances, and prior independent review are essential.
The purchase agreements and “Due Diligence” reports are public documents.	Although the Special Representative emphatically announced at Dili Convention Center (on national television) that these documents are public, they have not been made available, although La’o Hamutuk has asked TimorGAP and the Maritime Boundaries Office for them.
The current Petroleum Fund Law permits part of the Fund to be invested in Sunrise.	Article 15.1 of Petroleum Fund Law No. 9/2005 as amended in 2011 specifies that all of the Fund’s investments must be outside of Timor-Leste. Other clauses in Article 15 say that up to 5% of the investments can be ‘non-traditional’ (i.e. other than bonds and stocks), and that no more than 3% can be in any one company. Although the (vetoed) alteration of the Petroleum Activities Law opens the possibility for the Fund to be invested in TimorGAP, it does not revise the Petroleum Fund Law. Parliament could allocate money through the State Budget process to invest in the Sunrise field (the proposed 2019 budget includes $650 million to pay ConocoPhillips and Shell, and the Petroleum Fund will finance 88% of the State Budget). This would be a legal way for the Petroleum Fund to pay for part of the Sunrise Project without damaging the security, transparency and accountability of the Petroleum Fund.
Timor-Leste will have to pay fines to the companies if payments are not made by March 2019.	The agreement with ConocoPhillips says that if $350 million is not paid by the end of March, Timor-Leste will have to pay 5% annual interest (not a fine) on the unpaid balance. From November 2018 through January 2019, Timor-Leste received 9.3% (annualized) return from investing the Petroleum Fund, so Timor-Leste could benefit financially by paying later and keeping the money in the Fund longer. We do not know if there is an absolute deadline for making the payment. The payment to Shell is not due until March 2020.
Money invested by companies and Timor-Leste in the Sunrise project will be repaid, with 127% more added, just as was done for the companies who invested in Bayu-Undan. (In other words, a $100 investment will be repaid with $227.)	This is partly true. However, Bayu-Undan’s tax regime was designed to favor the companies’ interests over those of governments, and Sunrise doesn’t have to use the same system. Even if Sunrise uses these earlier rules, this would apply only to the investment at the field (upstream), but not to the purchase of participation, or to the pipeline and LNG plant. As gas is sold, money is used to repay investors, and Timor-Leste will get 56.56% of this, with the rest shared among the other investors. These repayments will reduce the royalties and taxes Timor-Leste will receive from Sunrise oil and gas production, so larger capital costs may not benefit the State.
Timor-Leste has received more than $5 billion because it diversified Petroleum Fund investments into the stock market starting in 2012.	Between the start of 2013 and the end of 2018, the Petroleum Fund received $1.95 billion in interest and dividends, which would have been received even if all the investments had remained in bonds. Its stock investments grew in value by $1.97 billion during that period, during which the global stock prices did very well. During the same period, the Fund received $6.93 billion in oil and gas revenues and lost $0.64 billion due to changes in currency exchange rates.
The Sunrise project will succeed because Timor-Leste’s leaders are determined to make it work.	Even if Timor-Leste obtains low-cost, low-risk financing, and the design, construction and management of the Greater Sunrise project are done perfectly, some factors are not within Timor-Leste’s control. Sunrise will be producing LNG for a quarter of a century, and the price of natural gas could drop drastically as non-conventional sources (i.e. fracking) continue to grow, or as renewable energy replaces fossil fuels. The consequences of climate change could cause nations to tax (or even outlaw) burning oil and gas, undercutting the economics of Sunrise. None of this is certain, but it is a serious risk.
If the project is approved expeditiously, Greater Sunrise will provide enough revenue to Timor-Leste in time to prevent the Petroleum Fund from being drawn down to zero in about ten years.	La’o Hamutuk estimates that Timor-Leste’s Petroleum Fund could be empty by 2027 even if the State does not spend or invest in the Sunrise project. If the Fund is invested (directly or through the State Budget) in Sunrise and Tasi Mane, it could be empty several years sooner. If everything goes as planned, proponents of the Sunrise project expect production to start toward the end of 2026. However, the experience of Bayu-Undan and other projects is that significant revenue does not come in until about two years after production begins, because production ramps up slowly and capital investors must be repaid first. Even if Sunrise goes perfectly, Timor-Leste will probably face several years of austerity – not having enough money to pay for basic services – unless the economy is rapidly diversified into non-oil sectors.
If Greater Sunrise does not produce the expected revenue and profit, project financers (especially China) could impose severe sanctions on Timor-Leste.	This is worrisome, but might be correct. Having loan agreements reviewed by the Audit Chamber will reduce or avoid this danger. In some countries, including Sri Lanka, Myanmar and Angola, loan agreements have forced gas and oil producers to sell to the lender at below-market prices, or have allowed foreign lenders to take ownership of key infrastructure. However, if the project is profitable, there is no need to sign financing agreements which impose harsh conditions on Timor-Leste – and, if it is not, it shouldn’t be done in the first place.
All the proposed components of the Tasi Mane Project are necessary to bring the Sunrise pipeline to Timor-Leste.	The Greater Sunrise pipeline and LNG project require the infrastructure at the offshore Sunrise field, the undersea gas pipeline, and the LNG plant and tanker jetty at Beaçu. It does not need the South Coast highway, Betano refinery or the Suai Supply Base. No economic or technical reason prevents Beaçu LNG from going ahead even if the other components are cancelled. Each component of the Tasi Mane Project should be decided separately, with its own independent, objective, cost/benefit/risk analysis.

Mai ba Festa Fundraising / Come to our Fundraising Party

Sabadu/Saturday 8 Desembru
4 pm - 11 pm
Iha Federasaun Hanai Malu Kooperativa
Across from Bairo Pite Klinik, Dili (Map)

Mai ita halibur hamutuk hodi han, kanta, dansa no fahe esperiensia! La'o Hamutuk organiza eventu Fundraising Publiku - no se ita bot sira apresia ami nia servisu, dadus, analiza sira, favor mai suporta ami ba kalan haksolok ida ne'e.

Sei iha banda muzika, aihan lokál, bebidas no fahe esperiensia kona-ba tópiku sira; hanesan (ekonomia, mega projetus, guvernasaun agrikultura no direitu umanu), ami mos sei fa'an faru La'o Hamutuk nian, ne'ebé bele sosa hodi suporta ami nia misaun sira.

Bele hola tiket, presu $5,  iha La'o Hamutuk nia servisu fatin, husi ita nia staf, ka iha Federasaun Hanai Malu.

Please join us for a night of music, food, drinks and sharing experiences. La'o Hamutuk is hosting this public fundraising event - so if you appreciate our work, data and analysis please support us by joining us for a night of fun.

There will be local bands, vendors selling local foods, drinks and space for open discussion about the various topics La'o Hamutuk analyzes (for example: economics, mega projects, governance, agriculture and human rights). We will also be selling T-Shirts, which you can purchase to support our mission.

We hope to see you there! Tickets can be purchased for $5 at our office, through our staff members, or at the Federasaun Hanai Malu.

Inclusive Family Planning Takes More Than Words On Paper

Liga ba blog ne'e iha lian Tetum 

Family planning is the basic human right of all individuals to freely and responsibly determine when they want to have children, and how many they want to have. It is important to ensure that family planning is inclusive, meaning it includes all citizens regardless of gender, marital status, age, sexual orientation or religion. Family planning is one aspect of reproductive health, which is also comprised of:

• HIV/AIDS prevention;
• Prevention and treatment of sexually transmitted diseases and infections;
• Pre and post-natal care;
• Sexual education and counselling especially for youths.

Some policy-makers view family planning from the perspective of economics, and conclude that better family planning slows population growth and increases wage and GDP. However, our own history of imposed ‘family planning’ as a measure of control under the Indonesian occupation, illuminates the dangers of framing family planning policies solely around economics and population control without viewing it as a human right. Today, Timor-Leste is an independent nation whose Constitution, article 57, guarantees universal, free health services to every citizen. To keep this promise, Timor-Leste must give our women and men the tools and resources we need to decide wisely about our own bodies and health.

La’o Hamutuk believes that family planning should be discussed openly and freely. If we frame the discussion solely around economics, we may forget that family planning is fundamentally about each woman’s right to make choices about her own body.

This article will discuss the importance of family planning in Timor-Leste, current policy, barriers to implementation and recommendations for the future.

Is Family Planning Important in Timor-Leste?

Family planning has recently been discussed more openly in Timor-Leste. It was a main policy recommendation of the United Nations Development Program’s 2018 National Human Development Report, which anticipates that wider use of family planning will decrease unemployment, and increase investment per capita, GDP and women’s life expectancy. The 2016 Demographic and Health Survey (DHS) reports on how many people use family planning, what methods are being used, and how many people want access to family planning. Additionally, in June 2018, First Lady Cidalia Lopes Nobre Mouzinho Guterres discussed the importance of family planning on an international scale.

Family planning is a prerequisite for sustainable and inclusive development. Inclusive family planning will greatly improve maternal and infant health, empower women, increase levels of education, protect the environment, and reduce the spread of HIV/AIDS. There will, of course, also be economic benefits such as increases to household income. Timor-Leste is a young country – 35% of our people are between 15-35 – and family planning will make their futures brighter based on their own choices.

The government of Timor-Leste is obliged by the Constitution to protect and care for all its citizens, regardless of gender, marital status, or religion. However, the implementation of the current Family Planning Policy has not included everyone, often leaves out young, rural and/or unmarried women. Family planning must be progressive and inclusive in practice, not just on paper.

Current Family Planning Policy and Implementation in Timor-Leste

In 2004, Timor-Leste adopted a National Family Planning Policy, which La’o Hamutuk considers both inclusive and progressive. This policy was developed after broad consultation and public debate, and has been embraced by many leaders in health, other sectors of government, and civil society, including religious leaders. The policy, which is still in place, states that reproductive health services should be “universally accessible, acceptable, convenient and available in an effective way at every health facility.” The policy states that all health facilities must provide reproductive services and counselling, including “an appropriate range of [contraceptive] methods” and “complete and accurate information about all methods” to all citizens, regardless of age, marital status, or gender.

Although the policy is better implemented today than it was 14 years ago, significant gaps and challenges remain. According to the 2016 DHS only 16.1% of women between 15-49 use some form of family planning, however this report is based on what women told the interviewers, and some may be embarrassed to share such information with a stranger. The graph below shows that injectables and implants are used much more than other methods.

No single method of family planning works best for everyone, since each method has its own benefits and drawbacks; therefore, La’o Hamutuk believes that everyone should have information and a full range of choices. The present dominance of injectables and implants suggests that many people are unaware of or unable to access other methods and options. The DHS reports that only approximately half of women using injectables (by far the most common family planning method), say that they decided to use them after being informed about potential side effects, what to do if they experience side effects, and what other methods are available.

According to the DHS, condom use remains low, with only 0.6% of respondents reporting using this method. This is not surprising when the public dialogue on condom use is stigmatizing and non-supportive. Family planning requires shared responsibility and decision making from both  men and women.

Further, it appears that vasectomy services are not available in Timor-Leste, due to a lack of equipment and skilled providers. This is a safe, simple and effective method of family planning.  Ignoring actions that men can take and their responsibilities in planning their families, places an unfair burden on women and allows men (including male politicians) to disregard family planning as a ‘women’s issue’.

Although the policy claims to be inclusive, young, unmarried and/or rural women often cannot access reproductive health services. According to the DHS, more than one-third of sexually active unmarried women say they want to use family planning, but only about half of these women have access to it. The 2016 DHS key findings, in line with global DHS reports, only present statistics on married women and their need for family planning, however it is important for influential reports, such as the DHS, to value and present unmarried women’s demand equally to help combat the stigma against them. Other important reports and surveys, such as the Census, should also add family planning components to their surveys so we can obtain a more complete picture of family planning in Timor-Leste.

Barriers to family planning in Timor-Leste

Every Timorese person has the right to decide which of the many family planning methods is best for them. Therefore, they must be informed about different family planning methods, including their benefits and risks. However cultural beliefs, which give more power to men in relationships, can restrict women’s ability to make these decisions themselves. Two recent studies, one on male attitudes to gender and the other on understanding violence against women, confirm that there is a continuing strong belief among both men and women that men should be the main decision makers in relationships. We must embrace and promote the cultural beliefs that empower women, and challenge those that disempower women, as an important step in providing family planning across the country.

Prominent educational campaigns led by the Catholic Church and other institutions have focused exclusively on traditional family planning methods. However, these campaigns have not persuaded many women to use these methods (see graph). This is not surprising considering that their effective use requires women and their partners to be able to read and do arithmetic, and to deeply understand their body and reproductive system; their sexual partners must also be open, communicative and supportive, which unfortunately is not the reality in most families.

Unfortunately, most young people have little information about reproductive health issues, and therefore cannot fully understand sexual health or make informed decisions about their bodies. For example, according to the DHS, only 23% of young women and 20% of young men say they have received information on reproductive health. Additionally, only 47% of women and 66% of men between15-49 have heard of HIV or AIDS. Unfortunately, many teachers and parents avoid discussing topics which may feel embarrassing to them. Even though sex education is in the school curriculum, it is often skipped over. Therefore, many young people do not know how to avoid becoming pregnant or how to avoid, recognize, or treat sexually transmitted diseases.

Specific recommendations to the VIII Government

Next year, our Government will submit its fourth periodic report to the Committee on the Elimination of Discrimination Against Women (CEDAW). The most recent CEDAW report, published in 2015, made the following recommendation to the Timor-Leste’s Government:
“Strengthen measures to ensure that all young women, adolescent girls and rural women have access to sexual and reproductive health services and emergency health care, and improve the quality of family planning services… irrespective of marital status.”

Drawing from and expanding on this recommendation, we urge the government to:

• Continue and strengthen implementation of the 2004 National Family Planning Policy, so that what is good on paper can also be good in practice. Family planning is not mentioned in the VIII Government’s program, but it is a necessary condition for achieving the goals of the Health Sector Strategic Development Plan 2011-2030, which aims to “increase access to and demand for high-quality ante-natal care, childbirth, postnatal care and family planning, including difficult access.”
  
  
• The 2018 State Budget allocated $43,000 to the Ministry of Health’s “maternal and reproductive health services including family planning”, which was reduced by nearly half from the 2017 Budget. La’o Hamutuk encourages the government to increase this allocation in the 2019 budget.
      Include specific and detailed programs for family planning in the Ministry of Health Action Plans, the Government Program, and the 2019 State Budget, the Government must ensure that there is adequate leadership, planning and budget to ensure proper implementation of this important policy.
  
  
• The Ministry of Health should invest more in providing health officials with the information, skills and resources they need to provide genuine and informed options to all Timorese, both men and women, married and unmarried, young and old, urban and rural. There should be special attention to promoting men’s shared responsibility for contraception (including condoms and vasectomies), and to sensitizing and educating men about their obligations related to family planning. The Ministry must ensure that implementation of policy does not discriminate against anyone.
  
  
• The Ministry of Health, Ministry of Education and the National Commission to Combat HIV/AIDS should ensure their public messages and discussions about family planning are inclusive, positive, supportive and rights-based. The goal is to empower all people to make appropriate and responsible decisions about their individual and family health, based on accurate and clear information.
  
  
• The Ministry of Education and Ministry of Health should continue the important collaboration they have started to ensure that reproductive health and sex education are taught in schools and teachers are mandated, capable, and confident to discuss this topic with students.

Conclusion

Timorese women and men do not yet have adequate information or choices about reproductive health, which violates their rights as outlined by the Constitution and by government policy. Past governments have not implemented the 2004 National Family Planning Policy effectively, and La’o Hamutuk calls on the Eighth Constitutional Government to do better. 

On 25 July, Timor-Leste’s Prime Minister, Taur Matan Ruak, in his speech to the newly sworn-in members of Parliament, emphasized that the youth of Timor-Leste are our greatest asset, and we must address their needs with regards to health, education, and employment. Providing family planning information and opportunities to every Timorese person – regardless of age, gender, religion, or region – is an essential condition for, sustainable, equitable development in Timor-Leste.

Konvite: Diskusaun Orsamentu Estadu

La’o Hamutuk ho FONGTIL sei realiza enkontru públiku ida ho títulu “Orsamentu Estadu ba ne’ebé de’it no oinsá ho previzaun ba oin?” no konvida ema hotu, inklui reprezentante husi Governu, sosiedade sivíl, akadémiku no ativista sira. Ho objetivu atu fahe informasaun kona-ba Planu Orsamentu ba kada Sektorál husi OJE 2019 nian no mós hetan perspetiva di’ak husi partisipante sira.

Ho oportunidade ida ne’e ami hakarak konvida ita boot sira atu mai partisipa iha Enkontru Públiku ne’ebé mak sei realiza iha:

Data : Tersa, 30 Outubru 2018
Fatin : Salaun Enkontru HAK-Farol, Dili
Oras : 8.30 to’o 12.30

Ita boot bele hetan informasaun preliminariu kona-ba OJE 2019 iha ne'e.

----------------------

Invitation to Discussion on 2019 State Budget 

La'o Hamutuk and the NGO Forum will hold a public meeting on "Where is the State Budget going, and how does it envision the future?". We have invited everyone, including representatives from Government, civil society, academics and activists. The objective is to share information about the Budget Plans for each Sector in the 2019 State Budget, and also to hear perspectives from the participants.

We take this opportunity to invite you to participate in this Public Meeting, which will be at:

Date: Tuesday, 30 October 2018
Place: Meeting Room at HAK Association, Farol, Dili
Time: 8:30 am to 12:30 pm

You can read preliminary information on the 2019 State Budget here.

Timor-Leste’s waters must remain a sanctuary for whales and dolphins

Joint Statement from Civil Society

Liga ba blog ida ne'e iha Tetum

Dili, 10 October 2018

Sperm whales. From Timor-Leste from Below, Episode 6.

Considering recent moves by the Government of Japan in support of whaling, we are concerned that the issue may come up during the Japanese Foreign Minister’s visit to Timor-Leste which begins on 11 October. We wish to make clear our strong support for Timor-Leste remaining a sanctuary for whales and dolphins.

As organizations committed to protecting the unique natural environment and valuable heritage of our beloved Timor-Leste, we note the Government’s strong support for marine ecotourism development and the protection of all marine life, as articulated in the National Strategic Development Plan, and in the Government’s recent Tourism Policy.  We also recognize and support the Ministry of Tourism’s ongoing efforts (with partners) to lead and develop the marine ecotourism sector, through its whale and dolphin monitoring program, its work with local tour operators, eco-volunteer organizations and local fishing communities.  In the latest Council of Ministers’ meeting, a “Development Plan for a Sustainable Economy of Marine Eco-Tourism in Timor-Leste” was presented, describing  “a proposal to transform Timor-Leste so that it becomes a reference in dive tourism and whale watching in Southeast Asia” and including “the protection and conservation of all marine life.”  While we do not yet know the details of this proposal and look forward to learning more, it seems to support our view that marine eco-tourism has serious potential, if properly protected.

Pilot whales. Photo by Kevin Austin

We strongly support the protection of our oceans and eco-tourism as part of plans for a more diverse and sustainable economy. A large percentage of our population already depends on marine and coastal life for food, nutrition, and family income. If developed appropriately, building on the Government’s existing efforts, whale watching and eco-tourism have the potential to bring significant economic benefits to local communities. There is an urgent need to diversify our economy, to bolster and expand non-petroleum sectors such as agriculture and fishing, small productive industries and tourism. And these must be developed with a strong commitment to sustainable policies that will safeguard our fragile natural environmental heritage. Our territorial waters are already a sanctuary for whales and dolphins (see Joint Ministerial Order No.18/MAP/MCIA/II/2017, also English), and this offers a unique and special draw for tourists.

Recent articles by international academics and media point to Timor-Leste’s potential as a haven for eco-tourism, particularly for whale and dolphin watching. While limited, our waters are deep and hold within them an estimated 1/3 of all identified species of whales and dolphins (scientifically identified together as “cetacean”). International media companies have already done extensive work highlighting and marketing Timor-Leste’s marine eco-tourism potential through photos and videos highlighting Timor-Leste as a perfect place to see blue whales on their southern migration, swim with sperm whales and see some of the highest concentrated populations of whales and dolphins in the world.  Whale and dolphin watching is recognized around the world as one of the fastest growing tourist sectors; there is also serious interest among marine biologists to study and photograph these beautiful mammals of the sea.  Alongside our largely organic agricultural surroundings, permaculture gardens, beautiful beaches and vibrant coral reefs, whales and dolphins are part of our national treasure, marking Timor-Leste as unique in the world and increasing possibilities to bolster both national and international tourism. By comparison, Sri Lanka has built a strong tourism industry based around whale-watching, and the concentration of whales and dolphins there is far less than in Timor-Leste.

Marine eco-tourism, however, can only flourish if we are able to manage our resources properly and protect our whales and dolphins from the various threats they face such as commercial hunting, shipping strikes and plastic debris entanglement and digestion. These threats, which according to international environmental groups like Greenpeace are increasing, were highlighted in the recent International Whaling Commission (IWC) meeting in Florianopolis, Brazil last month. The IWC was formed in 1946 and is currently made up of 89 member nations charged with the conservation of whales and management of whaling. In 1986, the IWC introduced a ban on commercial whaling, which is still in place. At this recent meeting, Japan introduced a highly controversial proposal, supported by 25 other members, which sought to remove the long-term ban, promoting instead a “coexistence” between conservation and commercial whaling. Following a bitter and heated debate, a majority of voting members rejected the Japanese proposal and confirmed the Florianopolis Declaration supporting the existing international ban on commercial whaling. Those defending this position say there is no need for endangering the whale population.

At the recent IWC meeting, fellow CPLP member Brazil proposed a measure to create a whale sanctuary in the South Atlantic Ocean, but the proposal failed to secure the 2/3 majority it needed to pass. By maintaining our waters as a sanctuary for whales and dolphins, we not only protect our national treasure, but we also offer the world a unique and special place to see these creatures.

As affirmed in Article 61.3 of our Constitution, "The State should promote actions aimed at protecting the environment and safeguarding the sustainable development of the economy." Timor-Leste has ratified the UN Convention on the Law of the Sea (UNCLOS 1982) which outlines state responsibilities for the management of marine resources, and we are a member of the International Maritime Organization (IMO). In 2007, Timor-Leste ratified the International Convention on Biological Diversity (CBD), and has since developed a National Biodiversity Strategic and Action Plan of Timor-Leste (2011-2020) which includes protection of our marine habitat.

Timor-Leste’s globally significant marine biodiversity needs and deserves careful protection and restoration through new marine national parks and heritage areas. Our Government and Ministry of Tourism need to develop the important necessary regulations, infrastructure, tourism training, accreditation and baseline monitoring to ensure the development of a sustainable industry which will benefit local communities while also ensuring the protection of whales and dolphins.

Timor-Leste must stand in solidarity with those members of the IWC who sought to protect whales and dolphins. We must oppose so-called “sustainable whale fishing” because there is in fact no such thing; Whales and dolphins are mammals, not fish, and are hunted, not fished. We need to ensure that our national policies counter the strong pro-whaling lobby.

Together, we the undersigned commit to protecting our oceans, protected areas, whales and dolphins from those who threaten them.

• La’o Hamutuk
• Haburas Foundation, Friends of the Earth TL
• PERMATIL
• HASATIL Network
• Movimentu Hadomi Natureza (Mohana)
• Conservation Flora and Fauna
• Tafon Green Association
• HAK Association
• Rede ba Rai – Land Network
• Kdadalak Sulimutu Institute
• Movimentu Tasi Moos – Clean Ocean Movement
• Oxfam in Timor-Leste
• RENETIL

Buying part of Greater Sunrise from ConocoPhillips

What does it mean for Timor-Leste and the Pipeline?

Liga ba artigu ne'e iha lian Tetum
An updated, longer article on this topic is on our website.

Last week, negotiators from the Timor-Leste government and the ConocoPhillips international oil company agreed that Timor-Leste will purchase ConocoPhillips’ share in the Joint Venture (consortium or JV) of four oil companies who hold the contract to develop the Greater Sunrise oil and gas field. By paying $350 million, Timor-Leste will become the owner of 30% of this project, together with Woodside (33%), Shell (27%) and Osaka Gas (10%). If the sale goes through, TimorGAP, as Timor-Leste’s national oil company, will participate in making decisions about the project, be responsible to contribute 30% of the investment, and be entitled to 30% of the profit.

This article will address some confusion and misinformation that is circulating in Timor-Leste and international media about the purchase and the Sunrise project.  La’o Hamutuk has followed this issue for many years (we published the book Sunrise LNG in Timor-Leste: Dreams, Realities and Challenges in 2008), and we continue to encourage fact-based, objective decisions to serve the best interests of Timor-Leste’s people. We hope that this article will help you understand legal, economic, social and environmental aspects of the project, which has the potential to bring significant benefits or huge losses to our people. Decisions should not be primarily motivated by “winning” a pipeline or overcoming the opinions of countries and companies, but by what will give the most benefit to Timor-Leste’s people over the long term.

Background

The Greater Sunrise undersea gas and oil field was discovered in 1974, but it has not yet been developed because of the Indonesian occupation, the (recently resolved) maritime boundary dispute with Australia, and disagreement about where the gas should be processed. Some analysts estimate that its gas and oil will sell for about $50 billion. After paying for capital investment, operating costs and company profit, this could generate $8-20 billion in tax and royalty revenue to Timor-Leste. If Timor-Leste becomes a part-owner, we will share in the profits, as well as in the responsibility for investment.

For many years, Sunrise has been stalled because Timor-Leste’s government has insisted that its natural gas be piped to Timor-Leste, where it will be cooled until it becomes a liquid (Liquefied Natural Gas – LNG) that can be loaded onto tanker ships and sold to overseas customers.  However, the four oil companies in the Joint Venture believe that other ways of making LNG – either through a pipeline to Australia (Darwin LNG or DLNG) or on a floating platform above the field (FLNG) – will be more profitable and less risky. Timor-Leste’s government believes that spinoff jobs, contracts and local economic development on the Tasi Mane coast will more than compensate for the higher costs and risks of bringing the gas here, but this view is not shared by Australia, the Sunrise Joint Venture, or the UN Conciliation Commission that facilitated the Boundary Treaty. La’o Hamutuk and experts we have consulted are not convinced that the benefits to Timor-Leste are greater than the costs, and we have repeatedly asked the managers of the project for the assumptions and data that make them so optimistic.

Last March, Timor-Leste and Australia signed an historic treaty to establish their maritime boundary, and it is pending ratification in both countries.  La’o Hamutuk celebrates this achievement as a significant advance for Timor-Leste’s national sovereignty. Although the negotiators had hoped to resolve the Sunrise question before the Treaty was signed, they were unable to. Because Sunrise straddles the boundary established by the new treaty, Timor-Leste will receive 70% of the government revenues for extracting Sunrise oil and gas if the gas is processed in Timor-Leste, and 80% if it is processed in Australia.

Buying out ConocoPhillips

Timor-Leste’s purchase of ConocoPhillips' 30% share of Greater Sunrise is one step in a long process which may eventually bring a gas pipeline from the Sunrise field to Beaçu on the south coast. Many Timorese citizens are proud of our political leaders for persuading or paying Australia and the oil companies to accept this position. However, this issue has financial, economic, environmental and social consequences which could affect people’s lives for many generations, and will be longer-lasting and more consequential than temporary patriotic emotion.  It is not yet clear that the Sunrise pipeline will be good for the people of Timor-Leste.

The nation needs and deserves a detailed, objective analysis, with complete public information, about the costs, benefits, risks, and impacts of the entire Greater Sunrise and Tasi Mane projects before billions of dollars of public funds are disbursed to oil companies, contractors, brokers and other individuals and companies who don’t have any long-term commitment to the nation or obligation to serve the public interest.

La’o Hamutuk has serious doubts that such an analysis will prove that the benefits of bringing the Sunrise pipeline to Timor-Leste are enough to justify its huge costs, risks and social impacts.  But even if it does, the recent agreement to purchase ConocoPhillips’ 30% share is insufficient to ensure that the pipeline will come here. 

What else has to happen to bring the pipeline to Timor-Leste?

1. Under the Sunrise Joint Venture rules, each other partner – Woodside, Shell, or Osaka Gas – has the right to “pre-empt” another buyer. In other words, if ConocoPhillips intends to sell its 30% share, one of these companies could purchase it to prevent it from going to someone else. Media reports indicate that Woodside may exercise this power, which would prevent Timor-Leste from buying the share from ConocoPhillips.
   
   
2. Australian and Timor-Leste government regulators will have to approve the purchase. The sales contract and Joint Venture agreement must also be approved by the Council of Ministers and reviewed by the Audit Court.
   
   
3. Timor-Leste will have to pay $350 million to ConocoPhillips early next year, sort of a down payment on much larger financial obligations in the future (see #5 below).  The $350 million – more than twice as much as Timor-Leste spends each year to educate our children – will be taken out of the Petroleum Fund, probably as part of the 2019 State Budget which the Government will propose to Parliament in November. We hope that Parliament’s debate on the Budget will fully explore this issue, including financial and other obligations that Timor-Leste assumes by joining the Joint Venture.
   
   
4. Even after Timor-Leste owns  a 30% share of Greater Sunrise, it will need to persuade Shell and Woodside to approve a pipeline to Timor-Leste, which may reduce the profitability of the project. Most Joint Ventures require unanimous approval for a major decision like this one.
        ConocoPhillips wanted to process the gas in Darwin, perhaps because it is the principal owner of the soon-to-be-idle LNG plant there that has been processing gas from Bayu-Undan. They persuaded Shell and Woodside to support their position. Before that, the Joint Venture had preferred Floating LNG; Timor LNG was always the third choice for all the partners.
        Without ConocoPhillips, the Sunrise JV will have less financial resources and technical and administrative expertise, and other partners may ask for compensation to accept the increased cost and technical and security risks of a deep-water pipeline to a new LNG plant in Beaçu, as well as the additional infrastructure and regulatory support that it will require.
        Potential buyers for the LNG will also have to approve the development option and will want assurance that the price, continuity of supply, and security of operation meet their needs.
5. Timor-Leste will need to pay at least 30% of the capital cost to develop the Sunrise field, which will be several billion dollars. This investment is not only for the pipeline and LNG plant, but for drilling exploratory and production wells, building the infrastructure to process oil and gas at the field (probably including  a Floating Production Storage and Offloading (FPSO) vessel to store and sell oil from Sunrise), operational infrastructure, and other costs. If this money is borrowed, Timor-Leste will have to pay it back with interest.  Although everyone hopes that this investment can be recovered a few years after the field starts production in 6-12 years, the money will need to be paid up front, and recovery is not certain.
6. After the partners and governments agree and the capital investment financing has been secured, the Joint Venture has to design and build the project, subject to regulatory and environmental approval and best practice.

Safeguards

The oil and gas industry has caused pollution, spills, accidents, fires and explosions all over the world, and we need to take appropriate measures to protect our beloved country. Nothing anywhere near this scale has ever been built in Timor-Leste, and virtually nobody here has ever experienced the potential environmental disasters it comes with.

Our regulatory agencies and environmental authorities do not yet have the knowledge, understanding, or perspective to manage a project like this, and they often find it difficult to stand up to political pressure. Although this scientific and administrative capacity could be developed over time – with support from people who have already had major responsibilities on similar projects – the learning curve is long and the consequences of mistakes are huge. “Learning by doing” is not acceptable when billions of dollars and thousands of lives are at risk.

The oil industry is secretive by nature, and projects of this magnitude all over the globe, involving payments of hundreds of millions of dollars to dozens of entities, are often riddled with corruption.  After Timor-Leste becomes an owner of Sunrise, our country and our money will be a magnet for thieves and scammers who want a piece of the action, and we may end up paying much more than we should or expect to.  With a project of this size and complexity, Timor-Leste needs to implement transparency, oversight, accountability, and checks and balances all along the way. We do not yet have the necessary safeguards in place, and we need to develop them immediately.

Conclusion

In summary, everyone in Timor-Leste needs to be certain that this long journey is one which will lead to a good place. Timor-Leste has already spent more than $250 million on the Tasi Mane project, mostly for Suai airport and the Suai-Fatukai highway. We are about to spend $350 million more to buy into Greater Sunrise, to be followed by several billion to prepare to extract its oil and gas. We may spend another $5-$10 billion to build the rest of the Tasi Mane project.

In other words, the country will spend most of our $17 billion Petroleum Fund – which finances education, health care, roads, water, electricity, veterans, PNTL, F-FDTL and many other things – to pursue the gas from Greater Sunrise. It is not too late to seriously consider its costs and benefits, and to see if the petroleum path is the most promising, practical and productive way to use the nation’s finite economic resources.  Should we invest our time, money, political capital and administrative skills in the Sunrise and Tasi Mane projects – or should we take the more certain, less dangerous path of diversifying our economy, building on our human and agricultural resources?

If we make the wrong decision now, it will be even harder to change course in the future, and we may continue to throw good money after bad.