Dili, 21 December 2001

EAST TIMOR AND PHILLIPS PETROLEUM REACH UNDERSTANDING RELATING TO TIMOR SEA GAS DEVELOPMENT

Representatives of East Timor and Phillips Petroleum (91-12) Pty Ltd. have reached an understanding on a tax and fiscal package that will allow the gas phase of the Bayu-Undan development in the Timor Sea to proceed with maximised revenues to East Timor. On 18 December the East Timor Council of Ministers endorsed the understanding.

Mari Alkatiri, Chief Minister of the Transitional Government of East Timor, said today from Dili: "East Timor has worked very hard with Phillips to achieve a successful conclusion on various outstanding issues. We look forward to a lasting partnership with them."

There will be a commitment to the development of Bayu-Undan as a total project, including offshore gas production facilities as soon as Phillips and the other Bayu-Undan unit participants have finalized gas sales agreements and the Designated Authority has approved these agreements. As part of the package, the Bayu-Undan participants will also commit to the employment of East Timorese and to investment in infrastructure in East Timor.

"This is a very important step for East Timor," said Alkatiri. "Petroleum revenue from the Timor Sea, and from Bayu-Undan in particular, will go a long way towards alleviating poverty in East Timor and will open up other investment opportunities in the joint East Timor-Australia area of the Timor Sea."

UNTAET Acting SRSG Dennis McNamara welcomed the agreement. "This successful outcome is the result of a successful partnership between UNTAET and the East Timor government with the petroleum industry. It demonstrates to the international community that East Timor will soon be financially, as well as politically, independent."

The estimated benefit to East Timor from the full Bayu-Undan development is $US 2.5-3 billion over the life of the field. The current annual budget of East Timor is $US 63 million.

AUSTRALIAN DEFENSE MINISTER PLEDGES CONTINUED SUPPORT

Australia's Defense Minister this morning met with Government and UNTAET officials in Dili to stress that Australia would continue to support East Timor after its independence next May.

"We expect [the East Timorese Government] to ask for ongoing support, and if so, we will provide it," Defense Minister Senator Robert Hill said.

"The Australian people are very supportive of our Government continuing to invest in the future stability and growth of East Timor," he added.

Acting SRSG Dennis McNamara met with Senator Hill this morning to discuss UNTAET's current downsizing and the shape a post-independence UN mission will take.

After arriving in East Timor yesterday the Defense Minister traveled to southwestern East Timor to meet with members of the Second Royal Australian Regiment. He left East Timor today.

ASSEMBLY EXPECTS TO MEET CONSTITUTION DEADLINE

Constituent Assembly President Francisco "Lú-Olo" Guterres said today he expects the assembly to pass East Timor's first Constitution by the 25 January deadline.

"The process is difficult but we expect to approve a Constitution within the extra time that we have allotted for the task," he said.

On 13 December the assembly passed a motion extending the 15 December deadline to 25 January.

The assembly members, who began debating the draft Constitution on 3 December, have so far passed 55 of its 151 articles.

The Constituent Assembly today passed the following three articles:

Article 53 deals with the right to private property; Article 54 concerns the right to social security, and provides that the state shall promote the establishment of a social security system. Article 55 recognizes the right of everyone to health and medical care and provides that the state shall promote the establishment of a national health service.

Meanwhile, Carlos Valenzuela, the Chief Electoral Officer of the Independent Electoral Commission (IEC), today presented the draft "Regulation to Elect the First President of the Democratic Republic of East Timor" to the assembly's Special Legislative Committee (SLC).

The SLC will meet on 27 December to consider the draft regulation in detail. The IEC requires a regulatory framewok to be in place by 15 January 2002 if presidential elections are to be held as planned in April 2002.

The assembly will not be convening on 24, 25, 26 and 31 December, nor on 1 and 2 January.