The tiny nation’s Cabinet approved the legislation which will let international energy firms begin exploring Timor Leste’s oil and gas reserves outside the Joint Petroleum Development Area, established by the controversial Timor Sea Treaty between Australia and Indonesia. To date, Timor-Leste has benefited only from petroleum development in the JPDA.

Secretary of State Gregorio de Sousa said the legal framework, to be endorsed by Parliament in the next few weeks, would create a transparent, competitive and stable model for the development of the nation's resources.

The agreement also laid the groundwork to create a petroleum fund for development in Timor Leste, which is looking to the energy sector as its major source of income with potentially billions of dollars of revenues available.

In addition, the Timor Leste government has developed in cooperation with the Australian government a complementary legal code for the Joint Petroleum Development Area, comprising a Petroleum Mining Code and a related model PSC.

The country also shares oil and gas reserves in the Timor Sea with Australia and is trying to resolve a dispute over the division of the area.