East Timor and Australia are close to reaching a deal over their disputed maritime border, East Timor's Foreign Minister has told the BBC.
Jose Ramos Horta said a temporary pact had been agreed, giving Dili more of the area's oil and gas revenues.
The sea border between the two nations has long been a source of contention.
Currently, Australia owns the lion's share of the Timor Sea oil fields, which have energy deposits worth an estimated $20bn in royalties.
Mr Horta told the BBC's World Today programme that an agreement had been reached in principle between the two countries.
He said East Timor would receive a greater share of the area's valuable oil and gas resources, while Dili would not continue to press for maritime boundaries to be redrawn.
Such an agreement "will cement the very important relationship between East Timor and Australia," Mr Horta said.
Mr Downer met his East Timorese
counterpart in Canberra on Wednesday, to discuss the framework agreement.
After their meeting, both men said they hoped to reach a deal by the end of 2004.
"It would be good if we could do that, if we can have a Christmas present... for all the people of East Timor and a slightly smaller... Christmas present for the people of Australia," Mr Downer told the Australian newspaper.
"We have the basic ideas... I think we can meet halfway, and now we just need to work out the details," Mr Horta added.
In the past, Australia has insisted it has the right to retain the border it shared when Indonesia occupied East Timor, marked by the continental shelf which at some places is just 94 miles from East Timor's coast.
The Timorese want the boundary to be drawn in the middle of the sea between the two countries, in line with international laws.
As one of the world's poorest nations, East Timor says revenue from the oil and gas fields is the only way it can end its dependence on foreign aid.