9 July 1937

SECRET

PORTUGUESE TIMOR

(A) STAUGHTON CONCESSIONS

On 25th October, 1926, representations were made to the
Commonwealth Government on behalf of Mr A. J. Staughton [1], who
desired to acquire further concessions in Portuguese Timor in
addition to the seven oil concessions which he held on behalf of
the Timor Petroleum Company of Melbourne. On 11th December, 1926,
Mr Bruce [2] advised that new conditions covering the grant of
concessions in Timor had been introduced, and that a rival
company-the Australian Oilfields Company-which was believed to be
under German control, was also negotiating for these concessions.

The British Ambassador in Lisbon then made an unsuccessful attempt
to discover the position. On 30th March, 1927, the Dominions
Office cabled the revised terms of the proposed Timor concessions,
but the Staughton concessions were excepted from these conditions.

On 15th July, 1927, tenders were invited for the monopoly of the
oil concessions on Portuguese Timor with the exception of the
concessions already granted to Staughton. No bids, however, were
lodged owing to the nature of the conditions.

During the next few years the Company experienced some difficulty
in carrying on business, and by 1932 it appears to have drifted
into liquidation, and a fresh company-Timor Oil Company-was
formed.

In 1936 the Foreign Office considered that the commercial value of
the Timor oil concessions was not great, while the Anglo-Iranian
Oil Company believed that the prospects of finding oil in Timor in
commercially exploitable quantities were slight.

On 12th June, 1936, Mr Officer forwarded a semi-official report
that the Allied Mining Corporation of Manila, the heads of which
were a Belgian, Dr Wittouck [3], and an American, Mr Houghton, had
obtained an oil concession covering the entire territory of
Portuguese Timor. A cable was therefore sent asking that
representations be made, through the British Ambassador in Lisbon,
to ensure that the interests of Staughton in Timor should be
safeguarded, and informing Mr Officer that a new company-the
Anglo-Eastern Oil Company-was being formed in Australia to take
over these concessions and commence exploiting them immediately.

On 4th August Mr Officer cabled that, if the field companies of
the new concern were postponing their departure to Timor only
because of his semi-official report, it would be better for them
to proceed to Timor and act on the assumption that the concessions
were in order. This information was communicated to Mr C. J.

Manning, the representative of the Anglo-Eastern Oil Company.

In the meantime the new Governor of Portuguese Timor [4] informed
Consul-General Walsh [5] in Batavia that the only company being
considered for the grant of concessions in Timor was the Allied
Mining Corporation, but that the official decision had not yet
been reached. The Australian Trade Commissioner in Batavia [6] was
asked if he could discover whether the Staughton concessions were
still valid. The Portuguese Consul in Sydney [7] also cabled Timor
to discover the position and a further telegram was sent to Mr
Walsh pointing out that on 26th August the Anglo-Eastern Oil
Company had made lease payments of 125 sterling for 1936. This sum
was accepted by the Timor Government, which thereby, it was
contended, waived its rights in respect of any alleged technical
infringement of the lease conditions.

On 12th September, Mr Manning received a telegram from Timor
reporting the publication of a Government edict announcing the
loss of his Company's rights according to Article 114 of the
Mining Law, and giving 30 days delay (expiring on 5th October) to
contest this decision. On 20th September, Mr Walsh reported that
the Acting Governor of Portuguese Timor [8] stated that the Anglo-
Eastern Oil Company concessions were unknown, the only oil
concessions being those belonging to A. J. Staughton. These had
not yet been cancelled, although they would be unless the proposed
cancellation was contested within the specified time. It was
alleged that the mining tax for the current year had not been
paid.

In December, 1936, the Portuguese Foreign Minister [9] informally
assured the British Ambassador [10] that the Staughton concessions
were not in danger, but that he wished them to be exploited, and
not used to prevent the development of other companies. His
Britannic Majesty's Consul-General at Manila [11] reported that,
towards the end of 1936, Dr Wittouck spoke to him of the
activities of the Allied Mining Corporation, alleging that there
were no Japanese interests in his concern. He said that the
Company had made an extensive survey of Portuguese Timor, and
proposed obtaining concessions from the Portuguese Government to
form three companies to deal with (1) oil; (2) mining in general;

and (3) agriculture over an area of 25,000 hectares. He added that
he expected to negotiate the companies' concessions in Lisbon
during June and July 1937.

On 11th January, 1937, the British Ambassador in Lisbon was
informed that the transfer of the concessions by Staughton would
not be recognised, as it had apparently been made without
informing the Portuguese Government. On 23rd March, Consul-General
Fitzmaurice [12] forwarded details of an unofficial report that
the Portuguese Government had promised Dr Wittouck (whom he
described as a most unscrupulous financier) an exclusive
concession in Portuguese Timor. Such a grant would be subject to
the Staughton concessions, but according to Mr Fitzmaurice's
informant, Staughton had not done what was legally required to
exploit the concession; exemption from the requirement to exploit
had not been accorded in the last three or four years and the
concessions were, therefore, in default. A Government mining
engineer is said to have reported that practically no work had
been done on the Staughton concessions for about eight years. On
the other hand, demands by public notice for rents had been issued
comparatively recently. The Australian concessionaires had been
called on to show cause why the concessions should not be
cancelled and they are understood to have filed an objection to
confiscation. Mr Fitzmaurice was informed that Dr Wittouck had
satisfied himself that the concessions could no longer lawfully be
claimed by Mr Staughton and had spent over 50,000 in exploration
work, while a deposit of 1,000 had been lodged with the
Government.

Mr Fitzmaurice's informant was a Mr Max Sander, a German Jew, who
has lived for over twenty years in Timor, and has lost his German
nationality owing to his failure to report for German service in
1914. He acted for some time in the service of the Allied Mining
Corporation, and Mr Fitzmaurice does not value his views on mining
rights very highly. Mr Sander has also reported an increasing
amount of Japanese penetration in Timor.

On 17th March, the Australian Trade Commissioner in Batavia
enquired as to the position in regard to the Staughton concessions
[13] and was informed that the enquiries by the British Ambassador
on 11th January were the last action to be taken. [14]

(B) JAPANESE PENETRATION IN TIMOR

On 24th April, 1937, a cable was received from Colonel Hodgson in
London [15] stating that Japanese interests were about to conclude
the purchase of a large company in Timor, the owner of which was
Celestino da Silva, and that instructions were being given to the
British Ambassador in Lisbon to point out to the Portuguese
Government what a bad impression this transaction would make on
the United Kingdom Government. On 24th April, 1937, the
Commonwealth Government cabled to London associating itself with
the proposed representations by the British Ambassador. [16]
Lord Huntingfield [17] referred to Japanese activities in Timor,
in a letter to the Governor-General dated 23rd June, 1937. [18] He
stressed the importance of maintaining Australian interests in
Timor and alluded to the concessions held by Mr A. J. Staughton.

He said that Mr Fitzmaurice thought that some means might be
found, possibly by the Australian Government, to ensure that the
concessions did not lapse by default, as they would be most
important as a place of vantage from which to keep an eye on the
Japanese in Portuguese Timor.

From a Military Intelligence Report of 2nd July, 1937 [19], it
appears that the property, for which the Japanese are negotiating,
belongs to Montalvao da Silva, son of Celestino da Silva, a former
Governor of Timor, and is approximately 20 square miles in area.

The purchase price is stated to be 4,000,000 yen. [20]

J. K. W[ALLER]