JAKARTA -- East Timor is looking to upgrade its natural-resource and transportation infrastructure, creating new business opportunities for overseas construction companies and plant builders.
As East Timor's politics have stabilized in the 13 years since the country gained independence, foreign companies are seeking to cash in. But as the country takes a tougher line on oil and gas development, and looks to create more jobs, investors are treading a careful line.
In Suai, a city on East Timor's southern shore, construction of a 3.3km seawall and an onshore facility for maritime resources development has recently begun for the Suai Supply Base project. Two Hyundai group companies, Hyundai Engineering & Construction and Hyundai Engineering, won the bid for the roughly $720 million project. It is scheduled for completion in September 2018.
The East Timor government has designated Suai as a key development zone in the country's south under the Tasi Mane projects. There are rich offshore deposits of oil and gas off the coast of Suai. As part of these projects, the government plans to build a 155kilometer highway connecting Suai to Betano and Beaco, two cities to the east. The projects are designed to create an industrial zone centering on oil and gas processing by 2030.
Timor Gap, E.P., a state-owned oil company, is in charge of the Tasi Mane projects. The company's president and CEO, Francisco Monteiro, said that the projects cannot be completed overnight and that the company is carefully laying the groundwork.
Construction of an airport began in Suai in May 2014. The facility is designed to handle helicopters and small airplanes with a capacity of up to 50 passengers. Indonesian state-run construction company Waskita Karya Tbk received the contract for the airport, which is worth $76 million.
In Betano, meanwhile, TTCL -- a joint venture between Japan's Toyo Engineering and Development Public, an Italian-Thai company -- has already completed the basic design work for a $2 million oil refinery. Timor Gap is conducting an environmental impact assessment and hopes to finalize an investment decision next year, said Monteiro.
There is another plan to build a liquefied natural gas production base in Beaco, east of Betano, along the southern shore. At the end of May, Amec Foster Wheeler, a U.K. plant builder, was awarded a contract from Timor Gap to do initial design work worth $3.8 million. Amec is also responsible for devising the project's procedures and coming up with the cost estimates needed to determine the project's profitability.
East Timor has set up a petroleum fund using royalties from oil and gas extraction in the East Timor-Australia joint development area in the Timor Sea. The fund was estimated at nearly $17 billion at the start of 2015; the money it generates covers 80-90% of the government's annual budget, which in 2014 was set at $1.7 billion.
Outside of oil and gas, coffee-growing is one of the few job-creating sectors of the economy. East Timor's per capita gross domestic product, including oil revenue, bobs around $4,000, higher than that of Indonesia and other neighboring countries. Even so, East Timorese living standards remain low.
Analysts believe falling crude oil prices have cut into the petroleum fund. The government has a pressing need to increase employment and foster new industries. While it aims to attract overseas manufacturers, it is also focusing on raising the added value of its natural resource industry by processing its gas and oil. The Tasi Mane projects are designed to do that.
At the same time, the authorities are taking a tougher line on oil and gas concessions. The Beaco LNG project is predicated on the cancellation of another effort, called Greater Sunrise. Japanese and Australian companies have invested heavily in that project, and had been planning to build an offshore plant as part of it.
With East Timor and Australia embroiled in a maritime border dispute, foreign companies are watching East Timor's resource policy carefully. The authorities oppose the offshore plant project because they believe an onshore facility would bring greater benefits to local oil and gas refiners, and generate more employment.
The country is now carrying out assessments for port facilities and pipelines, said an executive with Timor Gap.