Guterres holds the key to energy riches

Timor-Leste's election of President Francisco Guterres signals a new stability and an anticipated resolution to an oil and gas dispute with Australia

East Timor presidential candidate Francisco Guterres of the FRETILIN party shows his ink marked finger after he casts his ballot during the presidential election in Dili, East Timor March 20, 2017. Photo: Reuters / Lirio da Fonseca
East Timor presidential candidate Francisco Guterres of the FRETILIN party shows his ink marked finger after he casts his ballot during the presidential election in Dili, East Timor March 20, 2017. Photo: Reuters / Lirio da Fonseca

Former guerrilla leader Francisco “Lu-Olo” Guterres is tipped to become the next president of Timor-Leste, also known as East Timor, after exit polls showed he won a clear majority at this week’s polls. Preliminary results show that Guterres received 57% of the vote, while analysts speculate that figure will be closer to 60% when the official result is announced.

If so, it will be the first time since 2002 that a Timorese presidential candidate has secured more than 50% of the vote in the first round, allowing Guterres to avoid a run-off vote against the second-ranking candidate, thought to be Education Minister Antonio de Conceicao, who ran on the Democratic Party’s ticket. Guterres could be sworn in as early as May.

The election was held smoothly, an important development for a country plagued previously by election-related unrest and deep political divisions that have frequently erupted into violence. It was the first presidential election to take place since UN peacekeepers left in 2012.

A police officer stands guard as supporters of presidential candidate Francisco Guterres of the Revolutionary Front for an Independent East Timor (FRETILIN) party ride through the street during a campaign rally ahead of next week's elections, in Dili, East Timor March 17, 2017. REUTERS/Lirio da Fonseca - RTX31FR5
Violence-prone: A police officer stands guard at a campaign rally. Photo: Reuters/Lirio da Fonseca

Guterres, who failed in his 2012 presidential bid, is the leader of the Revolutionary Front for an Independent East Timor (Fretilin), a party that led the armed struggle for independence against Indonesian occupation. The top political parties, including the National Congress for Timorese Reconstruction (CNRT), all backed his bid for power. 

Fretilin and the CNRT entered an informal “unity government” in 2015 after independence hero and CNRT founder, Xanana Gusmao, stepped down as prime minister as part of a political compromise.

Taur Matan Ruak, the outgoing president, took it upon himself last year to act as the de-facto opposition to the unity government. Ruak claims the power-sharing agreement has allowed the two main political parties to waste dwindling financial resources and over-centralize power.

He also made it known last year that he would be running for prime minister in the upcoming general election in July with the backing of the newly-formed People’s Liberation Party (PLP), in what is expected to be a more charged electoral process.

In Timor Leste’s parliamentary system, the president is supposed to serve a ceremonial role, though most previous post-independence presidents have overplayed their hand.

East Timorese President Xanana Gusmao (C) stands during the country's second anniversary in Dili May 20, 2004. East Timor marked its second anniversary amid disputes with its giant neighbour Australia over gas and oil reserves. REUTERS/Lirio Da Fonseca TS/SUPRI/SH - RTRJYH8
Rebel leader: Ex-Timorese President Xanana Gusmao (C).  Reuters/ Lirio Da Fonseca

The opposed camps are expected to campaign on divergent policy platforms. While the CNRT and Fretilin will most likely not campaign together, they will both promise to implement more spending on development projects and consensus politics.

The opposition, a diverse group of political parties ranging from socialists to fiscal conservatives, will call for reduced spending, a crackdown on alleged corruption and economic diversification that lessens the young country’s dependence on energy exports.

More than 90% of the state budget is currently derived from oil and gas revenues, most of which is stashed away in the country’s sovereign wealth fund. Those coffers were at US$15.8 billion in January. However, there are credible fears that the fund could be depleted within a decade, while its main oil field, Bayu-Udan, is expected to dry up even sooner.

Much of Timor-Leste’s economic woes have been caused by a long stand-off with neighboring Australia over the ownership of nearby underwater oil reserves.

Timorese students shout slogans during a protest in front of the Australian embassy in Jakarta, Indonesia, March 24, 2016. Dozens of students and activists called on the Australian government to help resolve the maritime boundary issues between East Timor and Australia. REUTERS/Beawiharta - RTSC0SS
Boundary dispute: Anti-Australian protestors in Dili. Photo: Reuters/Beawiharta

Timor-Leste claims that many of its claimed oil fields were unfairly seized during the 24-year occupation by Indonesia, which allegedly cut deals with Australia to provide the southern nation with territory that lies well within Timor-Leste’s exclusive economic zone (EEZ). 

After Timor-Leste gained independence in 2002, the government agreed to put aside the issue until 2057 and, instead, divided up the so-called “Timor Gap” with Australia. In the deal, the “Greater Sunrise” field, which is said to hold more than US$40 billion worth of oil and gas, or nearly 226 million barrels of oil and five trillion cubic feet of gas, was split 50:50 between Timor-Leste and Australia.

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For the last five years, however, Timor-Leste has remained resolute that the oil from the field must be piped to a proposed US$1.4 billion refining complex on the country’s southern coast, despite industry experts warning that the idea was economically and financially unviable, or not at all. The standoff has prevented any extraction from the field.

Timor-Leste also accused Australia of spying on its government officials to gain intelligence about its negotiating position, though the case was dropped in January.

East Timor presidential candidate from Fretilin party Francisco "Lu Olo" Guterres arrives to lead a presidential campaign in Dili April 12, 2012. East Timor will hold the second round of the presidential elections on April 16, 2012. REUTERS/Lirio Da Fonseca (EAST TIMOR - Tags: POLITICS ELECTIONS) - RTR30MZ3
Popular: New President Francisco “Lu Olo” Guterres. Photo: Reuters/Lirio Da Fonseca

Despite Guterres’s incendiary comments in the past, including claims that allowing Australia to process fuel from the contested field was tantamount to ceding national sovereignty, his more recent statements towards Canberra have raised hopes that an agreement between the two neighbors could soon be reached.

On the hustings, Guterres said that Timor-Leste might be open to the possibility of allowing gas to be piped to an existing plant in Darwin, northern Australia, or on a floating station in waters between the two nations. He said that there are now “better prospects” for an agreement over the still contested maritime boundaries.

While the president is legally supposed to play a ceremonial role, this has seldom been the case in the past. And Guterres’ comments have led to speculation that he could emerge as a key figure in leading negotiations with Australia over starting work in the Greater Sunrise field.

Without such an agreement Timor-Leste risks becoming a “failed state” as its sovereign wealth fund runs dry, according to some critical commentators. But if the rich field’s development starts under Guterres’ leadership, the future could soon brighten for Asia’s youngest nation.

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