In this interview, the Secretary of State Alfredo Pires explains what is being done and planned in the natural resources sector, in Timor-Leste, especially in regards to Oil. On the work of ANP and the institutions that are in place. The development of Human Resources and how the oil revenues and where are they being spent.

The Secretary of State for the Natural Resources highlightes the importance of Timor-Leste joining the International Committee of EITI (Initiative for the Extractive Industries Transparency Initiative) and the rate of transparency this institution assigns to Timor-Leste regarding the management of oil resources.

What natural resources exist in Timor-Leste?

The definition of “natural resources” in Timor-Leste includes: oil, gas and minerals.

When we speak of minerals, this means metallic minerals (gold, manganese, copper and others) and non-metallic (sand and stones). Therefore, we have oil, we have gas and we have indication of the existence of several other minerals. Regarding these, the minerals, we still have much work to do, but it is work that will be done later. Now we are concentrating on a set of priorities that we have defined, regarding Timor-Leste’s reality and future. Therefore, our current objective is to explore the oil and gas available in the sea. And that is already in happening.

The other natural resources (exploration of minerals) is another process which is also on going because we are drafting the proposed law, but it will take some time Before exploration actually can take place.

In regards to oil and gas, what is already in progress?

Our task, regarding management of oil and gas exploration, is simultaneously being enhanced on several fronts. We are creating the much-needed institutions, preparing human resources and also getting the Country ready for challenges ahead of us.

Let’s consider human resources. We have made available a system of scholarships resulting in having now 160 Timorese students benefiting form this scholarship in many countries, studying for their university degrees and masters. This is to build their capacity and, at the same time, enhance the capacity of our institutions with people equipped with the best knowledge in relevant areas, which after all reflects our vision for the future. We also are investing heavily on those who are currently employed and we are negotiating training programs to enable them to acquire relevant experience. We have reached agreements with companies operating in Timor-Leste, international oil companies, and under the umbrella of these agreements we have some of our workers undertaking training in several countries.

Regarding the establishment of relevant institutions, after studying the experience of other countries, we concluded that it is best to separate the key areas – the regulating entity, the operational powers and the investigation, so that these are not to be mixed.

Hence, we created the ANP (National Petroleum Authority) to regulate the sector and we are about to create the National Oil Company to be in charge of the business side, as well the Petrology Institute (oil and geology) to be in charge of research.  These are the institutions that we think are necessary and we believe to be best if they are separated entities, although, of course, interconnected in one way or another, but with separate jurisdiction.

The Secretariat of State for the Natural Resources is charged with the policy aspects. We make the policies, initiate the laws and at the same time we involve the civil society through public consultation. Therefore, we tried to find a balanced, efficient and effective system to manage our natural resources. As I mentioned before, for now, we focus our attention on oil and gas.

So the foundation for Timor-Leste to be able to operate independently has been established.…

We’re establishing the foundation required to take advantage of all the opportunities available in this sector. And in this process we attain the capacity to manage the resources, but we will continue to need international assistance. We are conscious that we are a small country. Now, we must have the capacity to follow the whole process: the companies to whom Timor-Leste charge with responsibilities to undertake appropriate research, and we even direct the process, within our possibilities. And I can say that we are in a good path, we have gained a satisfactory level of capacity.

What level of capacity are we talking about?

We have developed important work, including undertaking research. The Directorate of the National Petroleum Authority is made up of Timorese only and all with relevant qualifications. The authority regulates the sector, obligates the companies to fulfil their contracts. I can say, for example, that the Italian company ENI, which work in the same area in several countries, has already told us that working with Timorese is very comfortable, in the sense that we fulfil our obligations.

Concerning oil exploration “what exactly has been done?”

We have one oil field already in business, and we are the ones regulating everything, through our regulatory agency, the ANP. And that, for us means a great deal, quite an achievement.

Why?

Timor-Leste joined a system of good governance and transparency entitled EITI (Extractive Industry Transparency Initiative) which is also known as “the Tony Blair Initiative”, since this was the initiative of the former British Prime Minister. It is managed by an international committee, according to Oslo directives. It involves countries, companies and civil society, at the international level.

So the news is that Timor-Leste is now also a member of the EITI International Committee. And this is important to us. It means, on one hand, that Timor-Leste has credibility and, on the other hand, that it has a voice in this important international institution!

In what way this is important for Timor-Leste?

It’s quite important, especially when we considered that, until today, only two countries, Azerbaijan and Liberia (of the 30 countries that adhered to this initiative) managed to fulfil all 18 criteria established by the EITI. One of the criteria is the publication of a directory – that must be available to all the world including, of course, the respective country – explaining how much money is involved and which was the process for oil exploration. This is to determine the level of transparency used by the country towards civil society and companies. Timor-Leste fulfils this.

Some countries argue that EITI is not relevant for them because they are advanced countries, where everything functions properly, such as judicial courts and other institutions. But as a member of the EITI International Committee, I question to what extent those countries involve civil society in the process?!

What is the consequence of Timor-Leste being part of EITI?

We have already produced the EITI report and which proved that not a single dollar was lost in the oil exploration process. Meanwhile, the team of international experts is evaluating the report and we expect the result to come out at the end of April.

I am confident that our position as far as transparency on the oil exploration is concerned is at high standing, and I believe that we may be amongst the top five, perhaps even first, but let’s wait for the outcome.

Can anybody have access to this information?

It’s all available through the Internet. You just have to look in EITI Timor-Leste and you’ll find the report there with all the details: how much money, what companies, what taxes, everything.

This is very important for transparency. We are 30 (thirty) countries fighting for recognition of our good name, our good governance, and whilst the criteria aren’t fulfilled, this objective isn’t accomplished, the country is not accredited. I am confidant that Timor-Leste is going to make it. In about a month, at the end of April, we will know.

With almost eight years of independence and at a time when the country is starting to manage well its natural resources, regarding oil exploration, what is the major challenge for Timor-Leste, at this point in time?

The main challenge is human resources. Prepare human resources in the best way possible to respond to the needs. We must have a notion understanding of the number of people beeded to be trained, how and in what areas, so as not to result in excess or shortage. I don’t know what the future Governments will do but this IV Constitutional Government, in regards to management of natural resources, is at the moment, as I have already mentioned, concentrating in make use of the revenues from natural resources to improve the people’s living conditions, life. When we consider natural resources we equate these with jobs, improving the living conditions of our people.

In terms of revenues, how much does oil gives to Timor-Leste?

A great amount. Right now, with only one oil field (and we think that we will have several in the future) Timor-Leste is managing to extract around one hundred million dollars a month. If one hundred million dollars a month, this means around three to four million dollars a day, when the price per barrel is around 60, 70 dollars.

It’s plenty of money for a population of about one million people.

With these values, can Timor-Leste be seen as a rich country?

A rich country but, unfortunately, still facing a lot of poverty. But it is also true that we have our particular history and, above all, we are just starting. And building a country, in the state that Timor-Leste was left in….these things don’t happen overnight. We have to build systems and make them work. We have to create human resources. We have to give the people time to gain confidence. We have to give time to time.

The process of economic development is very slow even when everything is done in the correct way. Now imagine if we fail on one issue: we delay the whole process. This is the reality.

Where does the money go?

All into a single bank account. This is also seems as the most appropriate. Not having several bank accounts means better control. It all goes into an account in the United States of America, hence we know all the transactions.

Why the USA?

The US currency was more stable. We invested in USA financial instruments which are quite safe and we believe this is the best. But now we are starting to have more capacity to diversify this portfolio.

Without taking undue risk, we are aiming at obtaining more profit from the petroleum fund, from our savings.

What amount is used form this Fund?

It is very well defined in by the law. We can only use what the law allows, and the law allows that we only use three per cent of the Petroleum Fund. There are those that consider this to be very little, that we need more now because we are creating our country’s infrastructures, but it is what is currently in the law…and changing that is another debate, a discussion that is on the table.

I stress again that the challenge we are facing is in the to preparation of human resources, not only in the area of resource management but also in financial management. A huge challenge indeed. We must have the institutions as well as ensuring that they perform as best as possible.

We have only eight years of independence. The major plans we are now devising, in terms of infrastructure, will certainly place the country in a better stand. We have clearly defined ideas in terms of how to move on. Most importantly, we are conscious of our existing capacity and how we can enhance it for the future.