49 Memorandum by Mr J. K. Waller, Department of External Affairs

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]

1 A. J. Staughton of 'Keayang', Terang, Victoria. Promoter of the Timor Petroleum Company, which undertook some drilling for oil in Portuguese Timor in 1925.

2 Prime Minister.

3 Serge F. Wittouck, Belgian financier and company promoter.

Director of Asia Investment Company of Hong Kong and President of its subsidiary, the Allied Mining Corporation of Manila.

4 Major Alvaro Neves da Fontoura.

5 Henry F. C. Walsh, U.K. Consul-General in Surabaya, acted as Consul-General in Batavia for periods in 1936.

6 C. E. Critchley.

7 R. Cullen-Ward.

8 Captain Eduardo Berardo Lapido Loureiro.

9 Dr Antonio de Oliveira Salazar.

10 Sir Charles Wingfield.

11 A. P. Blunt.

12 Henry Fitzmaurice, U.K. Consul-General in Batavia.

13 & 14 Not printed; See AA : A981, Timor (Portuguese) 22, ii. 15 Document 18.

16 Document 19.

17 Governor of Victoria.

18 & 19 Not printed; See AA : A981, Timor (Portuguese) 22, ii.

20 This memorandum was forwarded by T. Mathew to A. Stirling, External Affairs Officer in London, on 9 July 1937. Stirling was also asked to find out whether the Commonwealth's representations (see Documents 18 and 19) had been made to the Portuguese Government.

[AA : A981, TIMOR (PORTUGUESE) 22, iii]