East Ambalat row started as 'corporate dispute'

Fabiola Desy Unidjaja, The Jakarta Post, Jakarta

In the midst of increasing tension over the territorial dispute between Indonesia and Malaysia, it seems that the matter started as a business dispute between multinational oil giants.

Indonesian Minister of Energy and Mineral Resources Purnomo Yusgiantoro said on Wednesday that the dispute between the two countries began when the first contract holder of the Ambalat block -- located next to the now-disputed East Ambalat block -- tried to get a share of the oil rich offshore area that they had previously surrendered.

Purnomo said the Royal Dutch/Shell oil company was granted operational rights over the Ambalat block in 1999.

For business reasons, the Shell decided to hand over exploration of the block to the Italian Eni oil company, and thus withdrew from exploring the area.

After the oil companies concluded their agreement, Eni -- that was granted oil concession rights by the Indonesian government in September 1999 -- started exploration. Late last year, Eni conducted drilling at two sites in the Ambalat area, and reportedly found huge oil reserves at both sites.

Purnomo refused to reveal the estimated oil and gas reserves in the area, saying that it is a disputed area and the Indonesian government could not share details with the public.

After Eni discovered significant oil reserves at the Ambalat block, Shell, according to Purnomo, wanted to re-enter the area by using the Malaysian government and getting a contract for the East Ambalat block.

"It all began as a corporate dispute. But at the moment, we can't say anything as the case has now escalated into a sovereignty issue," he said.

The minister said that both Ambalat and East Ambalat blocks were Indonesian territory.

Indonesia has sent a letter of protest to Malaysia for awarding oil concession rights to Shell.

"Since it is our territory, we granted the concession contract to (U.S. oil company) Unocal to begin exploration at the East Ambalat block last December," Purnomo said, adding that Unocal should continue with the contract.

According to the contract, Unocal will begin exploration activities in 2006, and must complete a study of the area this year.

On the sidelines of the ongoing ASEAN (Association of Southeast Asian Nations) and EU (European Union) minister's meeting, the foreign ministers of Indonesia and Malaysia met late on Wednesday to discuss the matter.