Negotiations between East Timor, Australia and oil companies working Timor Gap offshore fields have bogged down over tax issues, with the companies saying they fear Dili may be seeking to impose higher rates than expected.

Phillips Petroleum official Jim Godlove said Wednesday in Darwin, Australia, where the three-way talks are taking place, that negotiations had stymied. The impasse could delay plans to advance with construction of a USD 500 million natural gas pipeline to the northern Australian city.

"We continue to negotiate with Australia and East Timor about this question, but up to now, there is no clarification of the final position", Godlove said.

Phillips Petroleum was worried, he added, that Dili, which gained tax rights over 90 percent of the Timor Gap fields in a July 5 accord with Australia, would insist on higher taxes than practiced under the previous accord involving Canberra and Indonesia, former occupier of East Timor.

A representative of a second operator, Barry Adams of Woodside Petroleum Ltd., said there were "rumors" that Dili planned to introduce a secondary corporate tax of 44 percent. "Naturally, this issue worries us", Adams said.