UPDATE 1-Dispute simmers over big Petaquilla copper project

(Adds Teck Cominco reaction, details, background, changes dateline, previously New York)

MONTREAL, April 29 (Reuters) - Petaquilla Copper Ltd (PTC.TO: Quote, Profile, Research, Stock Buzz) said on Tuesday it believes Teck Cominco Ltd's (TCKb.TO: Quote, Profile, Research, Stock Buzz) interest in the massive Petaquilla copper project in Panama has lapsed, a position Teck quickly refuted.

The companies' comments suggested a dispute is simmering behind the scenes over plans to develop the $3.5 billion project, which is seen producing 4.4 million tonnes of copper over 23 years.

In a statement, Petaquilla said it had delivered a notice to Teck seeking arbitration on the matter. Petaquilla said Teck failed to satisfy the preconditions for making a final commitment to the project.

"Teck Cominco's interest in the Petaquilla Copper Property has now terminated," Petaquilla said.

"The Petaquilla Copper Property is now owned by Petaquilla Copper as to a 52 percent interest and by Inmet Mining Corp (IMN.TO: Quote, Profile, Research, Stock Buzz) as to a 48 percent interest," it added.

Teck dismissed the statements made by Petaquilla Copper.

"We believe that the allegations made by Petaquilla Copper are without merit and that we acted in accordance with our rights and responsibilities in the agreement," Teck Cominco spokesman Doug Horswill told Reuters.

"We will vigorously defend ourselves and our position," he said.