Dili says it does not recognize claims by an American petroluem company that it obtained concession rights to exploit oil and natural gas in the Timor Gap from Portuguese colonial authorities in 1970s.

The economy minister in East Timor's transition cabinet, Mari Alkatiri, confirmed Friday to Lusa that contacts had taken place between Dili and the Petro Timor company. "But we are not working with them in the context of the concession granted in 1974. There is no recognition nor will there be any recognition of the concession", said Alkatiri, who co-leads East Timor's delegation in negotiations with Australia to revise the Timor Gap Treaty, signed in 1989 between Canberra and Indonesia.

Australian Foreign Minister Alexander Downer had been ruffled at news of contacts between Dili and the US company, saying that "recognition of such claims" could delay the bilateral negotiations for "several years".

Petro Timor, Alkatiri said, had tried to sweeten its claims by promising to build a natural gas pipeline to the south coast of East Timor, in contrast to current plans by operator Phillips Petroleum to construct the pipeline to Darwin, Australia.

On the drawn-out negotiations with Canberra, Alkatiri said Dili "hopes that things will improve and Australia ceases to be so stubborn and inflexible on some aspects". He said Australia was trying to hurry the negotiations into achieving a interim "first step" in accord with the interests of oil operators, who have set a July 15 deadline to advance with planned multi-billion dollar investments in the offshore fields.

"We are in a phase of bilateral negotiations between states and Australia seems almost to be defending the interests of (private) companies", criticized Alkatiri.