Jane Counsel – A United States company is stepping up efforts to settle a 25-year dispute over the oil and gas riches of the Timor Gap, announcing yesterday it would launch legal proceedings to validate its claims.

PetroTimor's chief executive, Mr Charles Haas, said the company planned to lodge a statement of claim in the Australian Federal Court within the next fortnight seeking legal recognition of a 1974 exploration concession granted over a large part of the Timor Sea.

That concession now forms much of the area covered by the Timor Gap Treaty. The concession was granted to PetroTimor by Portugal in late 1974 but effectively became null and void when Indonesia invaded East Timor in 1975.

The legal action threatens to derail sensitive negotiations between Australia and East Timor over a new treaty to replace one formed between Australia and Indonesia in 1989. Mr Haas said the legal action came after the company had exhausted all other avenues trying to convince Indonesian and Australian authorities of the validity of their claim.

"They have been trying to ignore us and hope we go away," Mr Haas said. "But that's not what we intend to do. We intend to protect our rights – we have obligations to our shareholders."

PetroTimor has not indicated who it intends to name as the defendant to the claim, but it is assumed it will be the Australian Government, which Mr Haas argues has refused to take the company's claim seriously. "Australia owns the most prolific parts of the Timor Gap – they simply did not want to recognise that [PetroTimor's] ownership," he said.

Mr Haas rejected accusations that the legal claim is a last-minute event staged to force a favourable outcome for East Timor in existing talks over a new Timor treaty.

PetroTimor, which is owned 80 per cent by Oceanic Exploration – a $US5 million public oil and gas company – and 20 per cent by the East Timorese, was granted an exploration concession for 50,000 square kilometres of the Timor Sea between Australia and East Timor in March 1974. PetroTimor's 1974 concession is almost a mirror image of "Zone A", a key area of the Timor Gap Treaty which is now being renegotiated.

But rather than give any validation to PetroTimor, the company, along with several others, was invited by the joint Indonesian-Australian authorities to bid for exploration permits for the Timor Sea after the treaty was finalised. PetroTimor refused to bid, arguing that it already held a claim to much of the Zone A area and that several promising oil and gas discoveries were subsequently made by other companies.

Several of those now form the basis of a $1.5 billion gas project being developed by Phillips Petroleum, which is under threat if PetroTimor's concession is validated. PetroTimor is hoping to proceed with separate plans to develop the Bayu Undan gas fields by building a pipeline to gas processing facilities in East Timor.