Timor-Leste

EITI Status Satisfactory progress

EITI Member Since 2007

Latest Data From 2014

Latest Validation 2018

Overview

Timor-Leste’s economy is heavily dependent on oil and gas. According to the latest EITI Report, the oil sector accounted for 76% of the country’s GDP and 98% of exports in 2013. The top five producing companies already account for 97% of government revenues. Production is rapidly declining and exploration activities are limited, giving rise to discussions on the need for economic diversification. Timor-Leste’s revenues are currently under pressure by low oil prices, but the impact on budget may not be that dramatic in the short-term as return on petroleum fund investments can cover the budget deficit. Nonetheless, there is considerable public debate about expenditure and exceeding the annual allowable amount that can be withdrawn from the Petroleum Fund.

All of Timor-Leste's revenue from the oil sector – USD 3.05 billion in 2013 according to the 2013 EITI Report - is deposited in the Petroleum Fund, which amounted to US $16.5 billion in March 2016 (www.eiti.tl). The EITI Reports track how much of the Petroleum Fund is transferred annually to Timor-Leste's budget.

Tax and legal framework

Petroleum activities take place both in the Joint Petroleum Development Area (JPDA) and in the Timor-Leste Exclusive Area (TLEA). The tax regime applicable to petroleum activities depend on the jurisdiction area, but profit oil, first tranche petroleum, royalties and corporate income tax are the main levies. FTP is a form of royalty collected for Bayu-Undan only. Royalty was paid in relation to Kitan until it ceased operations in 2015. Profit oil and gas is applicable to both Bayu-Undan and Kitan fields.The Timor Sea Treaty stipulates that Australia is entitled to 10% of all petroleum produced in the JPDA while 90% belongs to Timor-Leste. The National Petroleum Authorities (NPA) regulates the sector. A state-owned company, TIMOR GAP, was created in 2011 to represent the State’s interests in petroleum activities. All taxes go directly to the Petroleum Fund. All Production Sharing Contracts (PSCs) are public except for PSCs regulated under the Interim Mining Petroleum Code such as Bayu Undan and Greater Sunrise.

Licenses

The National Petroleum Authorities awards Production Sharing Contracts (PSCs) in both the JPDA and the TLEA on the basis of competitive bidding. The two main projects are the Bayu-Undan field and, until recently, the Kitan field which closed in 2015. In 2013, the government awarded a new PSC - JPDA 11-106 - to ENI, INPEX and TIMOR GAP. The contract was awarded through direct negotiations rather than competitive bidding, given ENI’s knowledge of the contract area and the desire to give the national oil company an opportunity to participate.

Beneficial ownership disclosure

Timor-Leste’s 2013 EITI Report states that most companies operating in the country are publicly listed. It gives listings information for the key operators in the country: Conoco Phillips, ENI and Woodside. Nonetheless, the MSWG is currently finalising the draft beneficial ownership roadmap that aims at documenting list of actions towards full beneficial ownership disclosures of extractive companies in Timor-Leste.

Beneficial ownership disclosures and the EITI

Timor-Leste Beneficial Ownership Roadmap

Production

Oil and gas production in 2013 declined by 12% compared to 2012, mainly due to depletion of the Kitan field. With Kitan's closure in 2015, Bayu-Undan is the only remaining producing field in Timor-Leste. According to forecasts in the EITI Report, operations at Bayu-Undan will last until 2022. There is limited exploration activity. According to the National Petroleum Authorities, five development wells were drilled in 2014. Whilst some wells were immediately brought on-stream, others were unsuccessful.

Hydrocarbons accounted for 98% of exports in 2013.

Natural resources

Timor-Leste’s main resources are oil and gas. To date all exploration and production has taken place offshore in the Timor Sea. The Greater Sunrise gas fields could yield US$15 bn or so over 30 years, but there is no agreement yet on how to develop the field.

Timor-Leste also has undeveloped mineral resources including copper, gold, silver and chromite. However, these minerals have to date been difficult to access given the poor infrastructure in the country and the lack of a legal framework. The government is currently working on a Mineral Policy.

Monthly production reports

National Petroleum Authorities 2015 Annual Report

Background and overview of oil and gas in Timor-Leste

The Greater Sunrise oil and gas project

Petroleum Economist: Time ticking for Timor-Leste as Sunrise shelved

Innovations

The EITI encourages multi-stakeholder groups to explore innovative approaches to make the EITI more relevant and useful.

The EITI process in Timor-Leste has been useful in disclosing the status of the Petroleum Fund and how it is transferred to the national budget. Looking ahead, stakeholders in Timor-Leste have suggested that the EITI could add more value if it covered budget execution, verifying that the money is spent on what it is supposed to be spent on.

With its current efforts to entrench transparency in government systems, Timor-Leste could lead the way in mainstreaming EITI disclosures. There are several examples of how government agencies are making data about the extractive sector transparent through government websites and other routine disclosures. The Transparency Portal that was created by the government of Timor-Leste links EITI implementation to wider transparency and accountability in the country. This includes a Budget Transparency Portal which gives an oversight to budget expenditure. Up-to-date information on the legal framework, licensing, contracts, production, social expenditures and non-tax revenues is also available through the website of the ANPM. The Petroleum Fund website contains quarterly reports on revenues and the overall status of the fund, as well as annual reports that include budget allocations. Timor Gap’s website has information on the financial situation of the company as well as other activities. The government of Timor-Leste has expressed strong interest in continuing mainstreaming transparency.

Implementation

On 1 March Timor-Leste was suspended for failing to meet reporting deadline of the EITI 2014 Report (the deadline was 31 December 2016). In accordance with the EITI Standard, the suspension will be lifted if Timor Leste is able to publish an EITI Report by 30 June 2017.

In January 2017, Timor-Leste was found to have achieved meaningful progress in implementing the EITI Standard. View more information under the Validation section of this page or go to the Board's decision in full. Previously, the country was compliant under the 2011 Rules.

The multi-stakeholder group (MSWG) approved a work plan for 2016 on 4 March 2016 which contains the following priorities:

Ensure publication of TL EITI report in a timely manner and in accordance with the EITI Standard;
Encourage discussions on transparency in public expenditures, including investment decisions, focusing on economic diversification;
Reform the legal framework and maintain contract transparency within extractive industries and other revenues generated in Timor-Leste; and
Institutional development for TL EITI secretariat, including capacity building for the MSG and outreach activities

Governance

The Ministry of Petroleum and Mineral Resources oversees EITI implementation in Timor-Leste. Alfredo Pires, Minister of Petroleum and Mineral Resources is the EITI Champion and Chair of the MSG. The EITI coordinator, Ms Elda Guterres da Silva, supports implementation on a day-to-day basis. The Multi-Stakeholder Working Group (MSWG) is composed of five civil society representatives, four industry representatives and eight government representatives. A list of MSWG members is available in the 2015 Annual Activity Report. Minutes are available from the TL-EITI website. No changes in law were needed for EITI to take place in Timor-Leste, nor were special Memoranda of Understanding required between government and industry for this purpose. However, the MSG is currently involved in drafting an EITI law.

Timeline

Validation

Timor-Leste was found to have made satisfactory progress in meeting the EITI Standard on 14 February 2018. The country was previously found to have made meaningful progress on 11 January 2017 during the First Validation. Timor-Leste took corrective actions on a number of requirements and achieved satisfactory progress during the Second Validation.

Timor-Leste's progress by requirement can be found in the scorecards below.

Board decision in full

News item on the Validation result

Country statuses explained

Documentation: Validation Report and initial assessment

Timor-Leste's progress by requirement

EITI Reports and other key documents

Timor-Leste Validation 2018

Published Date:

November, 2017

Publisher:

EITI

On 14 February 2018, the EITI Board found that Timor-Leste addressed all corrective actions and had made satisfactory progress in implementing the 2016 EITI Standard. See decision 2018-15/BM-39/BP-39-5-H

In this second Validation the EITI International Secretariat has assessed the progress made in addressing the ten corrective actions established by the EITI Board following Timor Leste’s first Validation in 2016. See more under background below.

Timeline of Validation and related materials

2015 Timor-Leste EITI Report

Published Date:

December, 2017

Publisher:

Timor-Leste EITI

This EITI Report covers Timor-Leste's extractive sector in 2015. It was published in December 2017.

2014 Timor-Leste EITI Report

Published Date:

May, 2017

Publisher:

Timor-Leste EITI

This EITI Report covers Timor-Leste's extractive sector in 2014. It was published in June 2017.

Timor-Leste 2016 Annual Progress Report

Published Date:

May, 2017

Publisher:

TL EITI

The Annual Progress Report provides an overview of all EITI Timor-Leste's activities during 2016.

Validation Timor-Leste 2016 - documentation

Published Date:

January, 2017

Publisher:

EITI

Timor-Leste's Validation commenced on 01 July 2016. On January 11 2017, the EITI Board found that Timor-Leste has made meaningful progress in implementing the 2016 EITI Standard

The following documentation laid the basis for the Board's decision, attached below:

Initial data collection by the International Secretariat Comments by the multi-stakeholder group (MSG) on the initial data collectionValidation Report by the independent Validator SDSG (

Timor-Leste beneficial ownership roadmap

Published Date:

March, 2017

Publisher:

Timor-Leste EITI

Attached below is Timor-Leste's roadmap on how it intends to disclose the beneficial owners of the companies active in the extractives sector (requirement 2.5).

More information on beneficial ownership can be found at eiti.org/beneficial-ownership.