Craig Skehan – East Timor is set to receive a much larger slice of income from the rich oil reserves it shares with Australia.

Federal Government sources said yesterday Australia was willing to give the incoming independent Government in Dili 80 per cent or more of the income from a joint production zone where the split was previously 50/50.

The Northern Territory Government, however, fears East Timor will press ahead with a territorial claim taking in Australian oil and gas fields off Darwin.

The Territory's Chief Minister, Mr Burke, will fly to Canberra today for talks aimed at ending the worsening diplomatic row with East Timor over billions of dollars in oil and gas reserves.

A United Nations official who serves as East Timor's cabinet minister for political affairs, Mr Peter Galbraith, said last week that the "illegal" Timor Gap Treaty was up for renegotiation. Australia does not accept a July 15 deadline set by Mr Galbraith for negotiations to be concluded.

The treaty, signed between Canberra and Jakarta after Indonesia's 1975 invasion of East Timor, set out a framework for the exploitation of oil and gas.

Currently under an interim UN administration pending transition to independence later this year, East Timor is desperate to expand its revenue base.

The Timor Gap issue is diplomatically sensitive for Australia, given criticism that the original treaty – supported by both Labor and Coalition governments – sold out the East Timorese people while they were under brutal Indonesian occupation.

Ironically, the less financially independent East Timor is in the future, the more it will remain dependent on Australian and other international aid.

Today's meeting will be between the Foreign Minister, Mr Downer, and Mr Burke, as well as the Northern Territory's Minister for Resources, Mr Daryl Manzie.

Sources said Australia was willing to allow the higher revenue split if there was no change in the seabed boundaries, which could open up problems over Australia's border with Indonesia.

A spokesman for Mr Manzie said Mr Galbraith appeared to have told East Timorese leaders they could afford to fight a legal battle for 25 years to get all the resources in the Timor Gap.

This included a bid for total control of a proposed gas pipeline to Darwin, the centrepiece of a $5 billion project. "That is crazy," Mr Manzie's spokesman said.

In Darwin yesterday, Mr Burke warned that if East Timor continued to take a hardline stand, it risked not getting any revenue for years to come.

East Timorese representatives have threatened to take Australia to the International Court of Justice if an agreement cannot be reached.