Rebecca Le May – A stalemate between East Timor's Government and a Woodside Petroleum-led joint venture to develop the $6.6 billion Sunrise LNG and oil project is likely to drag on.
Sunrise lies partly within the Joint Petroleum Development Area while the remainder virtually straddles the territorial waters between Australia and East Timor.
East Timor Secretary of State Agio Pereira was quoted in an Associated Press report on Wednesday as saying the government would not support Woodside's development plan, possibly derailing a 2006 treaty between the two nations that was ratified the following year.
A Woodside spokeswoman said the company would issue a statement on the matter late on Wednesday.
Hartleys oil and gas analyst David Wall said Mr Pereira's comments could mean negotiations between the company and East Timor will drag on.
The treaty involved setting aside Timor Sea maritime boundary claims for 50 years and increased East Timor's share of Sunrise revenues to 50 per cent, from 18 per cent under a 2003 agreement.
Woodside shelved the project in 2005 and has for the past few years described it as being at the end of its long pipeline of projects.
However, last month Woodside said it was targeting a final investment decision by the end of this calendar year. Central to the dispute with East Timor's government has been the development concept.
Woodside is considering whether to use a floating offshore processing vessel or build a pipeline to transport product to an expanded Bayu Undan LNG plant at Darwin, but East Timor wants a processing plant built on their shores.
Mr Wall said Woodside had previously resisted the pipeline to East Timor concept, saying a trench in the ocean floor between Sunrise and the southeast Asian nation made the proposal uneconomic.
He said friction over the matter had "never gone away". "It will probably be floating LNG," Mr Wall told AAP on Wednesday. "It's a disagreement on tax, really."
Mr Wall said the project could prove a much-needed boost to East Timor's economy. But its government could hold out for a bigger prize, he said.
"The Timorese need the tax dollars. Woodside is not going to be short of projects (if Sunrise is blocked)."
Woodside and joint venture partners Shell, Osaka Gas and ConocoPhillips have spend hundreds of millions of dollars exploring and studying the Sunrise fields.
They were discovered in the mid-1970s and are estimated to hold about 5.13 trillion cubic feet of gas plus about 226 million barrels of condensate, a form of light crude oil.