Malaysia and Brunei will hold ministerial-level discussions next week to settle a territory dispute that has halted oil exploration work in the area, a minister said today.

Both governments hope to reach a conclusion at the July 22 meeting at a venue yet to be confirmed, said Minister in the Prime Minister's Department Bernard Dompok.

The move followed Deputy Prime Minister Abdullah Ahmad Badawi's recent visit to Brunei, he was quoted as saying by Bernama news agency.

The contested area, involving two huge offshore blocks, represents about half of Brunei's entire offshore territory and is vital to its plans to diversify its oil-dependent economy.

Brunei last year awarded one block to French oil firm Total and its partners US Amerada Hess and Australian BHP Billiton, and the other to Anglo-Dutch giant Royal Dutch/Shell group, involving Mitsubishi and ConocoPhillips.

But the deepwater blocks have also been claimed by Malaysia since early this year and state-owned oil firm Petronas awarded identical acreage to US Murphy Oil and its own subsidiary, Petronas Carigali.

Total last month said it had suspended exploration work in the area after Malaysian gunboats chased away a drilling team. Malaysian officials said one of their exploration team simiarly had been chased away from the area by the Brunei military.

Brunei, a tiny enclave surrounded by Sarawak on Borneo island, is the fourth largest producer of natural gas in the world and third largest oil producer in Southeast Asia after Indonesia and Malaysia. - AFP