Mark Baker, Singapore – East Timor has warned that hundreds of millions of dollars in revenues vital for the country's development could be lost because of the Australian Government's refusal to ratify a treaty on joint development of oil and gas reserves in the Timor Sea.

Prime Minister Mari Alkatiri yesterday accused the Howard Government of stalling ratification of the $5 billion Bayu-Undan project in an attempt to force the Timorese to accept a smaller share of royalties for the neighbouring Sunrise fields, estimated to hold reserves at least twice as large.

Dr Alkatiri told The Sydney Morning Herald that unless the Timor Gap treaty were approved by Federal Parliament by March 11, a contract deadline for project operators Conaco-Phillips, the Japanese companies which have agreed to buy the entire output of Bayu-Undan might quit the deal.

"The Australians are trying to force us to give up on our claims on Sunrise. Their tactics are very clear," Dr Alkatiri said. "Australia knows that these revenues are vital for us. I am very surprised by their attitude. I never thought a democratic country like Australia would play this kind of role with a poor neighbour."

A spokesman for Resources Minister Ian Macfarlane yesterday confirmed that "priority' was being given to concluding the Sunrise negotiations, but said the treaty could still be ratified in the near future. "Our priority is now finalising the agreement on Sunrise. The treaty is in the queue to go to the House. Both countries are aware of the deadlines, but deadlines have to be moved sometimes," he said.

But Timorese officials said the Parliament would sit for four days next week then adjourn to March 18 and they had been told the treaty legislation would not be dealt with before then.

While Australia had proposed that East Timor receive 90 per cent of revenues from the 20 per cent of the Sunrise field within the Timor Gap treaty zone – the same sharing formula for Bayu-Undan – the Federal Government is insisting all reserves outside the zone belong to Australia.

The Timorese believe they are entitled to at least half of the royalties from the entire Sunrise field which lies much closer to the Timorese coast than to mainland Australia, but is not covered by an agreed maritime boundary.

Dr Alkatiri said Australia's failure to implement the treaty – which Prime Minister John Howard promised to ratify promptly when he attended independence celebrations last May – could wreck a project expected to bring at least $67 million in royalties in the first year.

"The Japanese will seek a better price or they may go elsewhere to find a more secure supplier," Dr Alkatiri said. "If Australia wants to retain its credibility and honour, this treaty must be ratified within the next week. Is Australia governed by the rule of law or not?"

Conaco-Phillips regional manager Blair Murphy said there was a danger that the company's deal with Tokyo Gas and Tokyo Electric could fall apart unless the March 11 deadline for approval of the project was met. "We're hopeful that it will be ratified in time, but we are taking things day by day."

The dispute over the projects has raised serious tensions in relations between Canberra and Dili in recent months. Timorese officials said there was an angry outburst by Foreign Minister Alexander Downer during a meeting in Dili on November 27 with Dr Alkatiri and senior Timorese negotiators.

A source who was present at the meeting said Mr Downer had thumped the table and abused Dr Alkatiri and his officials for insisting that they would not give up potential resources claims before a formal maritime boundary is agreed between the countries.