Malaysia-Brunei territory dispute halts TotalFinaElf
Malaysia-Brunei territory dispute halts TotalFinaElf
Dow Jones, Singapore
A territorial dispute between Malaysia and Brunei over potentially huge oil reserves offshore of the island of Borneo has derailed, for the time being at least, exploration plans by TotalFinaElf (TOT), industry sources said.
The dispute escalated to such a level that a Malaysian patrol boat recently chased a TotalFinaElf exploration vessel away from the area, the sources said.
TotalFinaElf has since stopped all offshore work at the disputed "Block J" area in the light of the recent incident, according industry sources in Brunei.
A profit-sharing development contract for the block was awarded in 2002 by the Brunei government, and was signed in April by TotalFinaElf, BHP Billiton and Amerada Hess.
Block J is within the Exclusive Economic Zone (EEZ) claimed by Brunei. The EEZ stretches 200 nautical miles out from Brunei's shore, in a northwesterly direction.
A TotalFinaElf regional exploration manager in Bangkok declined to comment Monday.
The Malaysian and Brunei governments have opted to keep quiet about the territorial dispute because negotiations between them on the sovereignty issue are ongoing.
The dispute is the latest in a series of sovereignty claims in the region involving Malaysia.
In December, Malaysia won an International Court of Arbitration ruling over Indonesia on the ownership of Sipidan and Ligitan islands off Sabah, on the other side of Borneo island from the area it disputes with Brunei.
Malaysia and Singapore are also currently in legal wrangles over the sovereignty of the tiny Pedra Blanca island, north-east of Singapore.
It seems that TotalFinaElf is taking a wait-and-see approach to the issue.
"It's not worth the trouble. TotalFinaElf is a big company...They will not want to take risks, especially when politics are involved," a source in Brunei said.
"Offshore oil exploration work costs a lot of money. If everything is up in the air, why would the company (TotalFinaElf) want to invest money in that operation," the source said.
However, TotalFinaElf is still carrying out research in Brunei, he said.
On the Malaysian front, oil exploration work in the overlapping "Block L" in the area is still going ahead.
Petronas Carigali - the oil and gas exploration and production arm of state-owned Petronas - has started drilling and carrying out seismic studies in Block L, and in the disputed area, a company source in Kuala Lumpur said.
The whole area is considered promising, in terms of proven or expected reserves.
Lying adjacent to Block L lies is another site, Block K, which is operated by Murphy Oil and Carigali, which has estimated recoverable reserves of 400 to 700 million bbl of crude.
In January, the Malaysian government signed a profit sharing contract with Murphy Oil and state-owned Petronas Caligari for the exploration of that block, with Murphy Oil holding a 60% stake.
The ongoing dispute between Malaysia and Brunei is expected to be a long-dragged out affair, with no quick solution in the horizon, industry sources said.
"This matter is very complicated, and it would be very hard to resolve it quickly," a second source said.
Although no official meetings have been set up to settle this matter, the governments of both countries will have the opportunity to discuss the dispute during the upcoming Asia Oil and Gas conference in Kuala Lumpur in June 15-17 as well as at a meeting of Asean energy ministers in Langkawi, Malaysia, in the first week of July, sources said.