Woodside Petroleum Ltd, along with ConocoPhillips and other resource companies, is facing demands by the East Timor government to pay up to $3 billion in disputed tax payments related to activities in the Timor Sea, according to an ABC TV report.

East Timor has increasingly focused on seabed rights and has levied accusations against private energy companies of not paying a fair share of tax for the resources being extracted.

The government's dispute with Woodside relates to the siting of a gas processing plan in the south of Timor used to handle produce from the proposed Greater Sunrise field, according to ABC's Four Corners program.

Woodside has said it would prefer to build a $13 billion floating platform and processing centre at sea, insisting that building a pipeline from the Greater Sunrise to East Timor would be prohibitively expensive and technically challenging.

The Four Corners program reported that the East Timor government established an audit and investigation team to examine Woodside's books 18 months ago and has already recovered $363 million in 28 individual actions.

"Our tax department is looking at the overall oil industry and asking companies to justify their expenditure and, as of today, if they do not provide us with justification there is the potential for that going up to $3 billion," East Timor finance minister Emilia Pires said, according to The Australian Financial Review.