Thursday, October 21, 2010

East Timor Forges Ahead on Deep Oil Drilling

DILI, EAST TIMOR — To Demetrio do Amaral de Carvalho, the explosion last spring on the BP-leased Deepwater Horizon rig in the Gulf of Mexico — and the oil that then gushed for months into the surrounding waters — held alarming portents for his young, fragile nation.

The disaster in the gulf spilled an estimated 4.9 million barrels of oil, prompting the United States to impose a moratorium on deepwater drilling that was provisionally lifted only last week.

But while much of the world, including the European Union, is rethinking the risks and benefits of drilling at ever greater ocean depths for oil and natural gas, East Timor, among the poorest nations in Asia, is just beginning to authorize it — and Mr. de Carvalho, director of the local environmental organization Haburas, worries that a reckless rush is on.

“If a country like America, with all its technical ability, financial resources and expertise,” felt obliged to suspend the practice, he said recently, “then I think Timor-Leste’s government should reflect on that.” Mr. de Carvalho used the official name of East Timor, a former Portuguese colony in the Indonesian archipelago that gained formal independence only in 2002, after a bloody 24-year occupation by forces of the government in Jakarta.

At issue in East Timor are two separate plans for exploratory drilling more than a kilometer, or 0.6 mile, deep in waters south of its territory, the first projects of their kind for the country. According to government officials, the plans received environmental approval last month.

One project, a joint venture led by India’s largest private conglomerate, Reliance, will create a test well about 1,200 meters, or 4,000 feet, below the surface in a nearby region known as Block K.

Of particular concern to environmentalists is that the project is to be carried out by the Deepwater Frontier, a ship belonging to Transocean, the same drilling contractor that owned the Deepwater Horizon. The April 20 explosion on that rig happened while it was drilling an exploratory well at about 1,500 meters.

The other project, a joint venture led by the Italian oil company Eni, will create an exploratory well in about 1,900 meters of water in the Cova-1 region in East Timorese waters north of Australia. Both projects are still awaiting the final green light from East Timor’s National Petroleum Authority. Eni has also submitted an early proposal for up to three deepwater test wells near the Cova-1 site, which is yet to receive any government approval.

Backers of the plans say they are essential for overcoming poverty in this tiny country of about one million people. But Mr. de Carvalho and other opponents say that drilling at such depths is inherently risky and that, if an environmental disaster were to occur, the country would be unable to cope.

The East Timor minister for economy and development, João Gonçalves, acknowledged in an interview that there were environmental dangers to the plans. But, he said, both outside companies had provided assurances that those would be at an “acceptable level.” He said he had signed off on environmental approval for the projects on Sept. 20.

“We are well aware, and we are going to deal with all these environmental problems that we have to deal with,” he said. “But we cannot stop the country from development, you know, from progress.”

Much of East Timor lives off subsistence agriculture, and there is negligible industry nor many exports. Many roads outside Dili, the capital, are barely passable by most cars.

The one exception is billions of dollars earned from offshore oil and natural gas production — money that is being used to build infrastructure and subsidize basic food needs. East Timor’s Petroleum Fund, which holds money in foreign investments, was worth $6.3 billion as of June 30, according to the latest quarterly report.

With an inducement like that, East Timor is under huge pressure to approve projects that are potentially hazardous but also potentially lucrative, despite the “wake-up call” of the Gulf of Mexico disaster, said Charles Scheiner, a member of a local development monitoring group, La’o Hamutuk.

“The oil companies are a thousand times bigger than the Timor-Leste government,” Mr. Scheiner said. This is the first time the government has had to approve deepwater drilling in its territorial waters, he said. “This is a test for Timor-Leste’s regulatory authorities.”

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