Rob Taylor – Australian companies exploiting huge oil and gas reserves in the Timor Sea were destroying marine life and threatening its fragile environment, an Indonesian watchdog group said today.

As Australia and East Timor argue over on how to divide $US30 billion ($38 billion) worth of seabed oil and gas royalties in the area, the West Timor Care Foundation accused Australian resource companies of not protecting the marine ecosystem.

The watchdog said oil leaks had already occurred in the disputed area.

Woodside Petroleum Ltd, one of the companies hoping to pump oil and gas out of the region before it shelved the project amid the continuing dispute between East Timor and Australia, had been aware of the damage, foundation director Ferdi Tanoni said.

"Woodside left the site because of the environmental damage that occurred and this is what worries us," Mr Ferdi said.

He said the foundation had sent an open letter to Prime Minister John Howard protesting about the damage and he called for Indonesia's government to reach an agreement with Australia which would assign responsibility to Canberra in the event of a serious leak.

"We are afraid that the gas pipe from the area to Darwin will leak and it will cause a disaster," Ferdi said.

"The ecosystem of the Timor Sea is threatened and may be destroyed.

"There must be implemented an international agreement between Indonesian and Australia if there were effects form those activities, because it is natural if those problems become Australia's responsibility."

A Woodside spokesman Rob Millhouse acknowledged two leaks had occurred from Woodside's floating production and storage ship, Northern Endeavour.

The first occurred in November last year and the most recent leak was in February, when about 50 cubic metres of oil leaked from flow lines attached to the facility.

"We not entirely sure of the cause yet. We are still investigating. But as soon as we noticed it we shut down operations," he said. "We disclosed the leaks and apologised."

He said the leaks occurred in Australian waters near the Laminaria-Corallina fields to the west of the disputed area, which Australia exploits unilaterally at 150,000 barrels a day.

Mr Millhouse said Woodside's mining operations in the area were governed by tough Australian environmental laws. Mr Ferdi said the operation ignored the rights and interests of Indonesian West Timorese.

The accusations came as the latest round of negotiations between Australia and East Timor broke up with no resolution.

East Timor is demanding that the dispute be settled in accordance with the 1982 United Nations Convention on the Law of the Sea, which would see the maritime boundary placed midway in the 600km sea gap between the two countries

But Canberra is holding to a boundary agreed with Indonesia following the 1975 invasion of East Timor and which placed the border just 150km from the Timor coast.

If Dili is successful, East Timor would be able to claim the bulk of the disputed fields and its share of oil and gas revenues would rise from $US4 billion to $US12 billion. Australian officials said before the most recent talks that they would seek a "creative solution" that would enable the $US5 billion Greater Sunrise field, the largest in the Timor Sea, to be tapped without the permanent boundary question being settled.