CANBERRA/SYDNEY -- Australian energy company Woodside announced on Tuesday it will divest its stake in the Greater Sunrise gas project in Timor-Leste, selling it to a local state-owned player for $200 million, a move one analyst described as a major blow to the Southeast Asian nation's ambitions to develop the long-stalled venture.

In announcing the decision, Woodside CEO Liz Westcott said, "While Sunrise remains a high-quality resource, the transaction further simplifies Woodside's portfolio and allows capital and management attention to be focused on opportunities that present the greatest shareholder value." "Greater Sunrise has been an important part of Woodside's portfolio for many years, and we recognize the project has the potential to deliver long-term economic and energy security benefits for Timor-Leste and the region," she said in a statement.

The Greater Sunrise gas fields are located in waters some 450 km northwest of Darwin in northern Australia and 150 km south of East Timor. Discovered in 1974, the area holds an estimated 5 trillion cubic feet of gas and over 220 million barrels of condensate, a light petroleum liquid.

However, its development has been held up by political, territorial and commercial disputes. A core issue has been disagreement over whether to pipe the gas to Darwin or, as sought by Dili, build a liquefied natural gas plant in Timor-Leste, also known as East Timor.

Timor-Leste President Jose Ramos-Horta told Nikkei Asia in June that a deal with Woodside was close to being signed and claimed it would involve piping the gas to East Timor. Ramos-Horta also claimed there were "many other interested parties" besides Woodside and minority stakeholder Osaka Gas, including "many companies from China." Osaka Gas is in the process of selling its 10% stake to Timor Gap, meaning Timor Gap will fully control the project once the deals are finalized.

Kevin Morrison, an oil and gas expert at the Institute for Energy Economics and Financial Analysis, said losing the last major partner casts serious doubt over the project's future viability, noting Timor Gap lacks the capacity to go it alone.

"Unless there's some extremely cunning plan that they've got somebody else lined up, I can't see how they're going to get it [developed] because the whole fiscal situation in Timor is deteriorating by the day," Morrison told Nikkei Asia.

Timor Gap President and CEO Rui Soares described the acquisition as a "significant milestone" for the company and the country.

"We are now in a stronger position than ever to expedite the development of Greater Sunrise and advance the selection of the Timor LNG development concept," Soares said in a statement.

The statement says that taking on Woodside's stake "consolidates ownership" and "positions the company to fast-track development of the field via a pipeline to Natarbora on the south coast of Timor-Leste." Indeed, developing Greater Sunrise became more crucial after the country's last producing field ceased operations in 2025. The International Monetary Fund and World Bank have warned that the country's Petroleum Fund -- oil and gas revenues the government relies on for 80% of its national budget -- could be depleted by the end of the 2030s.

Timor-Leste is one of the world's poorest countries, and the leaders in Dili see the project's fate as potentially meaning the difference between "national prosperity or collapse," said Melissa Conley Tyler, an honorary fellow at the University of Melbourne's Asia Institute.

Woodside's exit could open the door to China, said Damien Kingsbury, a Timor-Leste expert at Australia's Deakin University. Beijing might seek "strategic benefits," such as access to ports or airfields, in return for taking on the project's costs and risks, potentially raising concerns in Canberra, Timor-Leste's largest donor, Kingsbury said.

Westcott said Woodside would help "support an orderly transition" and preserve Sunrise's progress. Timor Gap will have to pay $13.71 million upon completion of the transaction. Further payments are conditional on the project reaching a final investment decision and starting production.

Woodside reported $4.28 billion in operating revenue for the third quarter, up 27% from the same quarter in 2025, resulting from higher gas prices tied to the Iran war.

Morrison said that from Woodside's perspective, Greater Sunrise, a midsize project that has grappled with engineering challenges, accounts for less of its portfolio now that the Australian producer has grown globally particularly in the U.S.

"It was just going around in circles," he said of the project. "They can afford now to get rid of it, whereas before, when they were a smaller company ... they didn't really have many other projects in their portfolio."