Paul Dyer – The $7 billion Greater Sunrise gas project in the Timor Sea has been shelved by project operator Woodside Petroleum.

Woodside has halted funds and reassigned project employees because a border dispute between Australia and East Timor remains unresolved.

There are fears the gas reserves, on which Woodside has already spent more than $200 million on exploration and marketing, may remain undeveloped for a decade.

If successful, the lucrative oil and gas field, 450km northwest of Darwin, could have seen 7.68 trillion cubic feet of recoverable gas come onshore to the Territory.

Company spokesman Rob Millhouse said last night the project had stalled. "We have said consistently unless we get legal and fiscal certainty by the end of 2004 the project would stall," he said. "That is where we stand."

A dispute about the maritime boundary and the division of royalties between Australia and East Timor was expected to have been resolved last month.

Under an interim deal, East Timor will get 90 per cent of taxes from the development area, which includes 20 per cent of the Greater Sunrise field.

But a small shift in the boundary would see East Timor gain a much larger share of the reserve – and a larger share in billions of dollars in taxes.

An accord between the nations passed through the Australian Parliament last year – but East Timor has refused to ratify it.

Negotiations are now at a standstill despite a more lucrative royalty sweetener – reported to be an additional $3 billion – being offered to East Timor.

Mr Millhouse dismissed reports the project was "dead" and said Woodside would reassess its decision if an agreement was reached. "It is now in the hands of the two governments to sort it out."

Department of Foreign Affairs and Trade spokeswoman Nicole Guihot said East Timor had been invited to restart talks before April. "We are willing to discuss any creative solutions the East Timorese come up with," she said.

Acting Chief Minster Syd Stirling said he remained confident the project would go ahead – and in less than 10 years. "It is a very large reserve and it will be developed," he said. "The question is when."