The Foreign Affairs Ministry has acknowledged that Brunei holds sovereign rights over the two Malaysian oil-concession areas known as Blocks L and M in the South China Sea.

In March last year, the two governments had signed an agreement to jointly develop the concessions, under a plan to resolve outstanding issues between the countries.

oil exploration in south east asia “Malaysia’s oil concession Blocks L and M, which coincide with Brunei’s Blocks J and K, are recognised under the Exchange of Letters as being situated within Brunei’s maritime areas...,” the ministry said in an unsigned statement today.

“Brunei is entitled to exercise sovereign rights under the relevant provisions of the UN Convention on the Law of the Sea 1982.”

Former premier Dr Mahathir Mohamad had in a recent blog entry accused his successor Abdullah Ahmad Badawi of surrendering the oil-rich areas to end the tussle for Limbang, a strip of land in Sarawak which cuts across Brunei.

Mahathir had further claimed that  total loss of earnings from giving up the two oil-concession areas would amount to US$100 billion (RM320 billion).

abdullah ahmad badawi Abdullah denied having given away the 'golden goose', saying Malaysia will be allowed to participate in joint efforts to develop oil and gas resources for 40 years, despite not having sovereign authority.

In the agreement signed by Abdullah and Sultan Hassanal Bolkiah, it was agreed that a Commercial Arrangement Area (CAA) would be established for oil and gas, as well as to establish permanent land maritime borders with Brunei.

“The establishment of the CAA incorporating these Blocks provides for a sharing of revenues from the exploitation of oil and gas ...between the two (countries),” the ministry said.

petronas “The termination of the Production Sharing Contracts covering Blocks L and M, which were awarded by Petronas to Petronas Carigali Sdn Bhd and Murphy Oil in 2003, is in accordance with the establishment of the CAA as provided for in the Exchange of Letters.

“The Exchange of Letters was the culmination of 20 years of tough negotiations between Malaysia and Brunei on various issues including maritime boundaries.”

According to the statement, the cabinet had approved the arrangement, while the governments of Sabah and Sarawak had been fully briefed on the provisions.

“The Exchange of Letters, which resolved the outstanding bilateral issues between Malaysia and Brunei through amicable settlement, will strengthen the existing relationship and enhance good neighbourliness between the two (countries),” it added.