I have the honour to acknowledge the receipt of copy of your despatch dated 14th July, to the Secretary of State for Foreign Affairs , which you so kindly forwarded to me. On behalf of the Commonwealth Government I would like to express my appreciation of the information you have supplied and the measures you have taken concerning Japanese efforts to acquire a footing in Portuguese Timor. As you rightly surmise this is a matter of direct concern to the Commonwealth of Australia and any large Japanese establishments at Dilli or its utilisation as a base of operations for further penetration in this part of the world cannot be regarded with equanimity.
You will recall that we supplied to you through our Trade Commissioner certain information regarding the activities of a Mr Manning who proposed to take over the Staughton concessions and work them on a large scale. However, mainly due to the uncertainty regarding the validity of these leases owing to the ban of cancellation hanging over them, he was not successful in forming his company and has passed out of the picture. This month a Mr Pascoe, a late Director of Oil Search Limited, has taken an option over the leases and hopes to induce Oil Search Limited to take them up. Oil Search Limited is a well-known Australian company which has been operating in several States of Australia and in New Guinea for some years and has received grants from the Commonwealth Government to pursue its oil investigations. It can command ample capital, but at the moment it is not prepared to operate the Staughton concessions unless a much larger area can be obtained. The Staughton concessions altogether cover only about three thousand acres which is regarded as inadequate for a thorough geological survey investigation and eventual exploitation. Consequently Messrs Staughton  and Manning are now endeavouring to see if they can obtain a much larger area, preferably a concession covering the whole of Portuguese Timor.
The following cablegram was despatched to my Liaison Officer in London for communication to the British Government:-
'Reference Staughton Concessions Timor oil and recent despatches relating to possible Japanese penetration. Staughton has granted option over his rights in Timor to E. J. Pascoe a past director of Oil Search Limited a well known Australian company which is receiving grants from Commonwealth Government and which it is understood from Pascoe is prepared to survey and develop oil fields in Timor if larger concessions than Staughton leases can be obtained.
Commonwealth Government would appreciate enquiry through Ambassador Lisbon  to ascertain if oil concessions covering whole of Portuguese Timor with exception Staughton leases have been granted any other Company. If not is there possibility of Staughton or an Australian company commanding ample capital procuring them and on what terms and conditions.
A direct approach by letter to Governor Dilli by Pascoe in June last has brought no reply. 
If you have been able to have a talk with the new Governors on his way through to Dilli you may be in a position to let me have further information as to what is the actual position. I would appreciate your views on the possibility of acquiring further concessions.
G. F. PEARCE