East Ambalat row started as 'corporate dispute'

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.