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East Timor may be running out of oil, and its $16 billion rainy day sovereign wealth fund may soon run dry—still, its former leader says East Timor will survive.
One of the world’s newest and poorest countries, East Timor in Southeast Asia, could still be a success story even with expectations that its oil fields will run dry by 2022 and its sovereign oil fund will be emptied by 2027, East Timor’s former leader Jose Ramos-Horta told Al Jazeera on the sidelines of a conference in Fiji.
Oil revenues accounted for 78 percent of East Timor’s budget for 2017, and the country has been heavily relying on oil income to try to grow out of poverty.
“Unlike many other oil and gas producing nations, we immediately created a sovereign wealth fund. We started with £250m and now we have more than $16bn in the bank,” said Ramos-Horta, who served as prime minister of East Timor from 2006 to 2007 and as president from 2007 to 2012, and won the 1996 Nobel Peace Prize along with Carlos Filipe Ximenes Belo for their efforts to bring peace and independence to East Timor.
According to the Sovereign Wealth Fund Institute (SWFI), the East Timor petroleum fund is worth $16.9 billion.
Last year, research by an East Timor-based think-thank said that the country’s oil and gas reserves have almost run out. In addition, oil and gas income peaked in 2012 and now is continuously dropping. The Bayu-Undan oil field that has provided about $20 billion for East Timor over the past ten years will provide only $604 million more from 2017 to 2021 and nothing after that, the think-thank said.
As oil and gas revenues decline, withdrawals from the Petroleum Fund grow and the fund’s balance “continues to fall due to withdrawals larger than income and poor investment performance.” According to the think-thank, the Petroleum Fund will be empty by 2027.
“We changed our laws in 2009 to allow bigger changes to our economic portfolio. We now have more than 1,000 investments around the world,” Ramos-Horta told Al Jazeera.
Speaking of the future of East Timor’s economy, Ramos-Horta said: “We could do much better.”
“But we can’t do miracles,” he told Al Jazeera.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.