5.000
%
Positive
80
mm boe
0
%
Since gaining independence from Indonesia in 2002, the country's growth has stalled and has been extensively tied to the O&G sector. Recent reforms have provided significant headwinds to the continued expansion of O&G, although recent news suggests that the government has acknowledged there is an issue, albeit apparently unwillingly reforming the sector.
April 6, 2024
Asia - Pacific
mm bbl
bcf
South eastern Asia, northwest of Australia in the Lesser Sunda Islands at the eastern end of the Indonesian archipelago. Timor-Leste includes the eastern half of the island of Timor.
PSC/PSA
The latest model Production Sharing Contract ("PSC") was introduced in 2005, and is relatively straight-forward. The State has the right to take an equity interest of up to 20% in any commercial discovery. The royalty rate, cost recovery ceiling and profit oil splits are all fixed; there is an additional profits tax (called Supplemental Profits Tax) levied at 22.5% on net receipts after a project achieves a 16.5% rate of return post-corporation tax. There is also a domestic market obligation whereby a contractor must sell up to 25% of its profit oil to the domestic market at a price equivalent to the FOB price at the field export point.
The government is implementing fiscal and economic reforms to comply with international best practices as it seeks to join the Association of Southeast Asian Nations (ASEAN). The country continues to struggle, however, with incomplete and unclear legislation, inadequate regulatory mechanisms, corruption, insufficient personnel capacity, and deficient infrastructure. The private sector is weak and primarily dependent on government contracts, and government’s ability to regulate industry remains limited. The government is looking for partners to develop the Greater Sunrise offshore natural gas reserves and build a petroleum infrastructure corridor on its south coast. The U.S. government’s Millennium Challenge Corporation is developing plans to assist with renovating the Dili municipal water and waste management system once its planned five-year compact is signed and comes into effect. Timor-Leste has said it would also like to invest in significant infrastructure on the country’s southern coast and maintains Special Economic Zones in Oecusse and Atauro Island. In 2020, the government closed its borders, temporarily ended commercial flights, and instituted a State of Emergency (SOE) to combat the COVID-19 pandemic. The government approved a $250mm withdrawal from its Petroleum Fund to pay for an economic stimulus and emergency relief package to offset the SOE’s impact on the economy and fund the containment effort. The economic downturn associated with COVID-19 has thus far cost the Petroleum Fund roughly $1.8bn.
Source: ESRI, Heritage Index, HMG Foreign & Commonwealth Office, US Department of State, International Trade Administration, International Law Review, Ernst & Young, Wood Makenzie & OGA data.
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