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DILI, Feb 21 AFP

February 21 2013, 7:52PM

East Timor's petroleum and natural resources minister says the nation may develop a multi-billion dollar gas project alone, ending its involvement with Australia's Woodside Petroleum.

Differences between the two sides have arisen over how to liquefy gas from the Greater Sunrise Field in the Timor Sea.

Casting aside Woodside's $US20 billion ($A19.62 billion) investment would also mean revenues are not split with Australia.

The Certain Maritime Arrangements in the Timor Sea (CMATS) signed by Australia and East Timor came into effect in February 2007, setting a deadline of Saturday for the two sides to agree on how to process the gas.

"Maybe we'll decide (to process the gas) unilaterally but we have to decide with the foreign affairs (ministry) of Australia," Petroleum and Natural Resources Minister Alfredo Pires told reporters on Thursday.

Woodside wants to process billions of dollars worth of gas on a floating processing platform while East Timor wants the gas liquefied on its soil via a gas pipeline.

Pires said the government was in talks with Australian Resources and Energy Minister Martin Ferguson, who visited the capital Dili on Thursday.

The CMATS was drawn up after a maritime dispute between the two nations and includes a gag clause preventing East Timor disputing maritime borders.

It can begin to negotiate borders, however, if the CMATS is terminated on Saturday.

"CMATS is signed by two governments but until now, we have not yet (drawn) maritime boundaries. We will choose the best solution for our future," Pires said.

After meeting with Pires, Ferguson said Australia wanted to continue working in East Timor's petroleum industries "to contribute to the development" of the country.

"I'm still continuing discussions with Mr Pires. I can say this matter will continue to be discussed between our governments," he said.

If no agreement is made by Saturday, the CMATS can be revived at a future date if the two parties come to new agreement on the project, or set new maritime borders.

East Timor, which gained formal independence in 2002, is a half-island nation of 1.1 million people with a sluggish economy dependent on oil and gas reserves.

The government plans to kick-start the economy with its sovereign petroleum fund, which surpassed $US11 billion last year.