TimorNewsNetwork

MARCH 17, 2010, 11:53 P.M. ET

East Timor's Oil, Gas Windfall Offers Opportunity for Growth

In Dili, the seaside capital of East Timor, the ripple effect of money generated from the country's vast oil and gas resources can easily be seen in the numerous construction sites that dot the city. But so far, the country's resource wealth hasn't benefited most ordinary East Timorese citizens.That isn't what followers of the tiny Southeast Asian country were hoping for.

Developing East Timor

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Will Baxter for The Wall Street Journal

Workers load bags of Vietnamese rice into waiting trucks at a government-run storage warehouse in Dili.

Asia's youngest democracy – it gained independence from Indonesia in 2002 – East Timor has in recent years struggled to maintain stability and boost living standards for its 1.1 million people. About half the population lives below the poverty line, and many still lack access to quality health services.

Almost all the country's government budget comes from a $5 billion petroleum fund, established with income generated from Bayu Undan, a project operated by ConocoPhillips in the Timor Sea. But many of the government-funded construction projects undertaken over the past year were cosmetic, including superficial upgrades like new government buildings. Development experts contend that far more cash – and more jobs – will be needed to ensure East Timor stays on the right path.

There is hope matters will improve once an even larger oil and gas field, Greater Sunrise, is fully developed. With an estimated 240 million barrels of light oil and 5.4 trillion cubic feet of natural gas, it has the potential to dramatically transform the country's economy, which aside from energy relies mainly on agriculture, employing 90% of the population.

But the project -- led by a consortium of companies headed by Australia's Woodside Petroleum Ltd -- continues to be delayed, most recently by a dispute regarding where the natural gas should be piped for processing. Oil and gas analysts say it could be years before the project is fully up and running. It's also possible some of its profits will be squandered on unecessary projects, analysts say, though East Timorese officials have promised to prevent that.

Whatever happens, the revenue generated from East Timor's oil and gas -- and how that money is invested -- will to a large extent determine whether the country blossoms into a sustainable economy or remains Southeast Asia's poorest nation.

—Will Baxtersource: THE WALL STREET JOURNAL / WORLD