Timor-Leste’s economy has been heavily dependent on oil and gas, which accounted for over 90% of the country’s revenues in 2017. However, due to the closure of fields, oil revenues have been in decline, and government revenues from the sector dropped to 70% in 2018.
All of Timor-Leste's oil revenues are deposited in the Petroleum Fund. However, there is considerable public debate about expenditures exceeding the annual allowable amount that can be withdrawn from the fund, which had a balance of USD 15.8 million by the end of 2018.
In this context, Timor-Leste has been using EITI reporting to shed light on transfers from the Petroleum Fund to the national budget. The EITI is also serving as a platform for dialogue between government, industry and civil society.
The Timor-Leste government maintains a Transparency Portal which gives oversight over budget expenditures as well as up-to-date information on the extractive sector including the legal framework, licensing, contracts, production, social expenditures and non-tax revenues.
EITI reporting has been used to disclose the status of the Petroleum Fund and how funds are transferred to the national budget. The Petroleum Fund website contains quarterly and annual reports with data on budget allocations.
Extractive sector data
Top paying companies
Extractive sector management
Tax and legal framework
Timor-Leste’s oil and gas sector is mainly governed by the Petroleum Activities Law, while the mining sector is governed by the Mining Code and Ministerial Order. Petroleum activities take place both in the Joint Petroleum Development Area (JPDA) and in the Timor-Leste Exclusive Area (TLEA) under production sharing contracts (PSCs) signed between the oil companies and the National Petroleum and Mineral Authority, ANPM. Both the mining and oil and gas sectors are regulated by ANPM.
A state-owned oil company, TIMOR GAP, represents the state’s interests in petroleum activities. This company receives an annual public transfer for the purpose of supporting its operational activities in accordance with the state budget. All revenues from the oil and gas sector go directly to the Petroleum Fund in accordance with the Petroleum Fund Law.
The tax regime applicable to petroleum activities depends on the jurisdiction area, but profit oil, first tranche petroleum (FTP), royalties and corporate income tax are the main levies. The Timor Sea Treaty, which was signed in 2002 and covers the Bayu-Undan and Greater Sunrise fields, stipulates that Australia is entitled to 10% of the revenue from the joint area while 90% belongs to Timor-Leste.
License and contracts
Production sharing contracts (PSCs) in both the Joint Petroleum Development Area (JPDA) and the Timor-Leste Exclusive Area (TLEA) are awarded on the basis of competitive bidding, in accordance with the Petroleum Activities Law. Mining licenses are awarded on a first come first serve basis by the Petroleum and Mineral Authority (ANPM), as per the ministerial decree.
Timor-Leste does not have a legal framework mandating the disclosure of beneficial owners. The country also does not have a public beneficial ownership register. However, as most extractive companies operating in the country are publicly listed companies, EITI reporting provides links to the stock exchanges where companies are listed.
In 2019, TL-EITI commissioned a beneficial ownership feasibility study to establish a definition of beneficial ownership and provide recommendations for beneficial ownership disclosure.
All of Timor-Leste’s oil and gas revenues are deposited to the Petroleum Fund, which is solely invested in international financial assets. The amounts transferred from the fund to the state budget are guided by the Estimated Sustainable Income (ESI), set at 3% of total petroleum wealth. However, since the creation of the fund in 2017, the government has withdrawn an average of 5% of the fund.
There is no mechanism for subnational revenue allocations in Timor-Leste. Some companies pay voluntary social expenditures for community development initiatives.
TL-EITI is administered by the Timor-Leste Multi-Stakeholder Group (MSG). The MSG is hosted by the Ministry of Petroleum and Mineral Resources and chaired by Dr. Victor da Conceição Soares, Minister of Petroleum and Mineral Resources.
Timor-Leste was found to have made satisfactory progress in implementing the  EITI Standard in February 2018, following its second Validation. Timor-Leste fully addressed the corrective actions identified in its previous Validation. The subsequent Validation commenced in January 2022.