The Australian Parliament is expected to ratify the Timor Sea Treaty this week, ensuring a 20-billion dollar contract for natural gas can go ahead. East Timor ratified the Treaty in December and has been nervously waiting for its bigger neighbour to do the same before a crucial March 11 deadline. East Timor stands to gain the bulk of tax and royalty earnings from the gas fields which straddle the maritime territory of both countries. But as one chapter closes on the sometimes rocky relationship between Australia and East Timor, another opens.

Presenter/Interviewer: Karon Snowdon, Finance correspondent

Speakers: Jonathon Morrow, Head of the Timor Sea Office of East Timor's Prime Minister; Australia's Foreign Affairs Minister Alexander Downer

Snowdon: Next Tuesday is the deadline on which the economic future of East Timor hangs. Next Tuesday is when Japanese contracts for an estimated 20-billion dollars worth of gas from the Timor Sea can lapse if the Treaty hasn't been ratified by both Parliaments. Without the Treaty, no contracts, without the contracts no gas development and no money for East Timor. Under the Treaty, East Timor can earn around 180-million dollars a year from resource taxes when the gas starts to flow in 2006. Without it East Timor is almost broke.

East Timor ratified the Treaty in December, Australia says its legislation should pass through both houses of parliament this week. So why has Australia waited until the very last minute to put up its legislation to enable a treaty the two Prime Ministers signed a year ago at the Independence day celebrations in Dili?

The answer is found in Greater Sunrise – the much bigger resource in the Timor Sea which lies mostly in Australian territory, with just ten per cent within East Timor's boundaries.

East Timor has always said the two issues are separate and besides it intends to challenge the boundaries and claim 100 per cent of Sunrise itself. Australia wanted to finalise an agreement to allocate the resources of Greater Sunrise before it ratified the Timor Sea Treaty – its called a unitisation agreement.

Australia's Foreign Minister Alexander Downer says an agreement is close.

Downer: We have been finalising those negotiations on the Greater Sunrise Field and I think we've pretty much got there now.

Snowdon: Asia Pacific understands an agreed text was finalised last weekend which confirms Australia's claim to 80 percent of Greater Sunrise with 20 percent to East Timor. East Timor's negotiator, Jonathon Morrow, says Prime Minister Mari Alkitiri will take the agreement to his Cabinet on Friday.

Morrow: East Timor is happy or at least I should say the Prime Minister is happy and his negotiators are happy. Under this development it will lead to a just outcome, a fair outcome, and in particular a fair outcome for the people of East Timor.

Snowdon: So basically, East Timor has the 80:20 split roughly in favour of Australia, and you say you are happy about that when in the past East Timor has heavily criticised that split.

Morrow: That split favours Australia obviously. However the important thing to understand about that split in the Treaty and in this Sunrise agreement which reflects the Timor Sea Treaty is that its not a permanent agreement. It is truly without prejudice to the questiion of permanent maritime boundaries and East Timor intends to press Australia for a permanent maritime boundary delimitation in the near future.

Snowdon: Is there any pressure coming from Canberra for East Timor's Cabinet to sign the unitisation agreement prior to the Australian parliament ratifying the Treaty?

Morrow: What I will say is we'd be very disappointed if at this stage the Australian government were to try to link the Treaty ratification process to the approval of the unitisation agreement by the East Timor government. That would be very disappointing news indeed. And we trust and hope that no such linkage will be made, it would obviously be very counterproductive at this late stage as we are moving quickly towards the 11 March deadline.

Snowdon: With much higher potential earnings from Sunrise than the smaller Bayu Undan, locking in the unitisation agreement before it ratifies the Treaty would be in Canberra's interests.

In the critical matter of timing, Australia's Northern Territory where the gas is to be piped, is also waiting expectantly for the outcome of the diplomatic poker game being played out between Dili and Canberra. When both agreements are signed and sealed as they no doubt will be, the next round involving maritime boundary negotiations will prove much harder.