"We'd be concerned that the Australian Government should understand if Bayu Undan LNG does not go ahead and we do not get the revenue stream we and our donour nations have been promised, Australia would be condemning East Timor to decades of poverty," said Jonathon Morrow, head of the East Timor Office of Prime Minister Mari Alkatiri.

This week, officials from Phillips and Santos met with Prime Minister John Howard to try and get the treaty introduced into parliament before the parliamentary recess, however, there efforts were to no avail as the government blamed recent riots in Dili for the delay.

ConocoPhillips, which hopes to develop a $3 billion liquefied natural gas complex based on the Timor Sea Bayu-Undan reserves, said the decision put pressure on continuing the project but the Australian Government remained unconcerned.

"I'm sure Phillips has been involved in many international negotiations that have not met initial time frames. This one is no different," a ministerial spokesman said.