The East Timorese government has raised concerns that it risks losing millions of dollars in revenue, as a result of Australia's carbon tax.

The carbon price of 23 dollars per tonne, which will be imposed on July the 1st, might be applied to companies operating in the oil and gas fields in the Timor Sea, which are jointly shared by both countries.

The government in Dili says it's yet to receive formal details about the possibility of the additional costs from Canberra.

Correspondent: Girish Sawlani

Speakers: Alfredo Pires, East Timorese State Secretary for Natural Resources; Greg Hunt, Australian Opposition's Spokesman for Climate Change

Sawlani: The dispute over the maritime boundary between Australia and East Timor has been a thorn in relations between the two countries. At the centre of the dispute, are oil and gas reserves at the bottom of the Timor Sea worth billions of dollars. For the moment at least, tensions have been pacified by revenue sharing deals struck in 2002 and 2006. They range from a 90 to 10 ratio in favour of East Timor for gas fields such as Bayu-Undan to a 50:50 arrangement for revenue from the Greater Sunrise Field. But both countries are still at odds over the location of a natural gas processing plant in the Greater Sunrise field. East Timor wants the plant on its shores, while the Australian firm tasked with developing it, Woodside Petroleum is seeking an offshore platform.

Now a new dispute could be emerging, as a result of the Australian government's carbon tax, which will be implemented on the 1st of July. The new legislation imposes a 23 dollar per tonne of carbon tax on many of the country's high polluting industries, including the energy and resources sectors. And some of these companies are involved in the processing of natural gas and oil in the Timor Sea. Agreements between Canberra and Dili state that revenue will be split once costs are deducted. While the Australian government receives the revenue from the cost of the carbon tax, little is known about how East Timor will be affected.

Greg Hunt is the Australian Opposition's Climate Change spokesman. He says East Timor stands to lose millions of dollars in revenue.

Hunt: The carbon tax hits East Timor, one of the poorest countries in the world, through the Bayu-Undan field of the Timor Gap. The revenues are shared jointly. East Timor gets the majority, and the government has imposed the carbon tax on this field but it doesn't pay it itself because it simply shuffles money between one source of Australian revenue and another. East Timor, however, is likely to be hit for millions and millions of dollars of carbon tax each year, every year, for the life of the field. So one of the poorest countries in the world will be subsidising one of the wealthiest countries: Australia.

Sawlani: In a statement, a spokeswoman for Australia Climate Change Minister, Greg Combet says the government in Canberra will consult with East Timor about any application of the carbon price within the Joint Petroleum Development Area and will ensure that any arrangements reflect Australia's obligations under international law.

Alfredo Pires is East Timor's State Secretary for Natural Resources. He says there's been no formal agreement between Dili and Canberra over the carbon tax.

Pires: The latest legal advice that I've been getting from my technical people is that on any agreement, and these things need to be discussed. So if there is an agreement in black and white, I would like to see it.

These are not small issues that you can decide unilaterally. It needs to go through it, there are big implications. Particularly, I understand that Australia needs to have an environmental piece of legislation, but you really need to consider before moving into areas that are not totally of the sovereignty of Australia.

Sawlani: He says it would be unfair if East Timor faced additional costs as a result of the new tax.

Pires: We will be very concerned about any additional costs that may have to be borne upon the country. But we need to look at the exact figures. But right now, as secretary of state and as part of the government, our main concerns is about the applicability of the legislation.

Right now, we would like to keep things as it is till we have further discussions, for us to analyse and see if there's any benefit. You've got to bear in mind that these are two countries, neighbours that are very different in terms of economical development. And anything that bears any additional cost to this little country will be seen as unfair.

Sawlani: Mr Pires says as a small nation, East Timor's contribution to global carbon emissions is insignificant, when compared to Australia.

Pires: I don't think we've been responsible as a small country, new country. This environmental damage is mainly done by a lot of industrial places. So we'll consider very carefully whether we're going down the line of paying anything at all.