Dennis Shanahan – A gas revenue deal worth $5 billion for the infant nation of East Timor is expected to go ahead despite the election campaign clashing with scheduled negotiations next month.

The last federal cabinet meeting before the Coalition goes into election "caretaker" mode cleared the way yesterday for a deal on gas revenues from the Timor Sea.

Cabinet has established the benchmarks for offering a greater share of the revenue from the massive Greater Sunrise gas project headed by Woodside Petroleum, which could be between $10 and $12 billion over 25 years.

The decision is based on the understanding that Labor has abandoned Mark Latham's suggestion that negotiations would start again under a Labor government and the East Timorese have accepted there would be no new deal.

East Timorese officials have informed the ALP that they are keen to have the dispute settled and the project finalised before the end of the year.

Labor has indicated to the Government in Dili that the Opposition Leader's public comments that negotiations would have to recommence under a Labor government because of "bad blood" over the negotiating table did not mean there would be a change of policy under the ALP.

East Timorese sources said they were happy with the Government's proposal and the ALP's agreement, which meant the deal could be finalised.

The revenue-sharing negotiations have been bitter at times with the East Timorese leadership accusing Australia of colonialism and theft over the revenue from gas fields falling within maritime boundaries negotiated with Indonesia.

Cabinet yesterday agreed to the broad principles for a better deal for East Timor based on a greater share of revenue but the same maritime boundaries.

Under the Coalition's new deal the existing maritime boundaries would remain but there would be an increase in tax revenue of about $3 billion.

Woodside Petroleum and the other joint venture partners, Conoco Phillips, Shell and Osaka Gas, have warned they will pull out of the project if the revenue dispute between Australia and East Timor is not settled by Christmas.

Three weeks ago Alexander Downer and East Timor's Foreign Minister Jose Ramos Horta worked out terms for a broad agreement. Mr Horta said East Timor was trying to demonstrate it would not waste resource income.

"The resources that will flow to East Timor under a fair settlement with Australia will help make our nation a viable, independent and prosperous neighbour of Australia," Mr Horta said.