That was the word from Australian Foreign Minister, Mr Alexander Downer, after meeting with East Timor chief minister Mr Mari Alkateri last Friday. The unresolved commercial issues include the tax implications of Phillips Petroleum $US150 million Bayu-Undan agreement with East Timor as well as the "unitisation" agreement covering Greater Sunrise gas reserves.

"The issue of royalties and the pricing and the taxation arrangements haven't been worked out. They (East Timor) will definitely want their fair share as they see it and so obviously will we," Mr Downer said. "But it just hasn't been worked out and nor was it particularly expected to be by this time."

He added there were still a lot of issues that needed to be worked out after independence.

Mr Downer remarks represents a backflip for the Federal Government, which had followed the line of the major oil companies such as Shell, Woodside and Phillips Petroleum that the above issues had to be resolved before any treaty could be signed.