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Cablegate: Timor-Leste Completes Extractive Industries Transparency

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RR RUEHCHI RUEHHM RUEHNH
DE RUEHDT #0332 3551242
ZNR UUUUU ZZH
R 211242Z DEC 09
FM AMEMBASSY DILI
TO RUEHC/SECSTATE WASHDC 4640
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0131
RUEHBY/AMEMBASSY CANBERRA 1362
RUEAIIA/CIA WASHDC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RUEHLI/AMEMBASSY LISBON 1181
RHEHAAA/NSC WASHINGTON DC
RUEHKO/AMEMBASSY TOKYO 0974
RUCNDT/USMISSION USUN NEW YORK 1150
RUEHC/USAID WASHDC
RUEHDT/AMEMBASSY DILI 4196

UNCLAS DILI 000332

SIPDIS

STATE FOR EAP/MTS AND S/CIEA

E.O. 12958: N/A
TAGS: EPET EFIN ENRG PGOV KCOR TT
SUBJECT: TIMOR-LESTE COMPLETES EXTRACTIVE INDUSTRIES TRANSPARENCY
REPORT

1. The Government of Timor-Leste completed its first Extractive
Industries Transparency Initiative (EITI) report and conveyed it
to the president in a public ceremony on December 21. The
report covers activities during calendar year 2008 and was
compiled by the chartered accountant, Deloitte Touche Tohmatsu,
and by Timor-Leste's EITI Working Group. President Ramos-Horta,
Secretary of State for Natural Resources Alfredo Pires, the
Country Manager for ConocoPhilipps, and a representative of
civil society all delivered remarks praising the transparency
and accountability promoted by the report as well as the
cooperative process that went into drafting it. The report must
now be validated according to EITI rules, a process the GOTL
hopes to complete in 2010.

2. According to the report, the Timorese National Petroleum
Authority (the regulatory body that administers petroleum
activities in the Joint Petroleum Development Area that
Timor-Leste shares with Australia as well as in the Timor-Leste
Exclusive Area) received just over $2.5 billion from extractive
industry companies in calendar year 2008, which it transferred
to Petroleum Fund Account held by the Banking and Payments
Authority in accordance with Timor-Leste's Petroleum Fund Law.
Two-thirds of the total came from royalties ($1.62 billion) and
one-third from petroleum taxes ($880 million). ConocoPhilipps,
the operator of the offshore Bayu Undan field (the only field
currently in operation in Timor-Leste) paid 60 percent of the
royalties and taxes. Joint venture partners Eni, Inpex, Santos
and Tokyo Timor Sea paid the majority of the remaining royalties
and taxes.

3. COMMENT: The EITI process and the fiscally-sound Petroleum
Fund Law give the Timorese Government two effective tools for
monitoring and managing the revenue it receives from the
petroleum sector. Timor-Leste has serious shortcomings in
managing the expenditure side of the ledger, however, including
insufficient parliamentary oversight, a weak Auditor-General's
office, and the lack of an independent procurement commission.
Activities carried out under the Energy Governance and
Transparency Initiative (EGTI) could make a useful contribution
to addressing some of these shortcomings. END COMMENT.

KLEMM

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