Brunei and Malaysia have made "some progress" toward resolving rival claims to potentially oil-and-gas rich waters, says Prime Minister Abdullah Ahmad Badawi.

Discussions between officials from both sides are continuing to resolve outstanding issues, Abdullah said at the end of a two-day meeting which included talks with Sultan Hassanal Bolkiah, who is also prime minister of the kingdom.

"We recognised that some progress had been achieved by our officials who were involved in the discussions and we urged them to continue with the discussions," Abdullah was quoted as saying by Malaysia's official news agency Bernama .

"And we hope that they will be able to come back to us with some specific suggestions for the Sultan and I to talk (about) before we can come to some kind of agreement."

Abdullah said no timetable had been set on when the talks would be completed, adding that "we would like this to be concluded as soon as possible."

Other areas of cooperation

The dispute centres on a potentially oil and gas-rich offshore area claimed by both countries off Borneo island.

Brunei, a tiny monarchy surrounded by Malaysia's eastern states of Sarawak and Sabah on Borneo, in 2002 awarded exploration rights to one block to French oil firm Total and another block to the Royal Dutch Shell Group.

But since 2003 the deepwater blocks have also been claimed by Malaysia, whose state-owned oil firm Petronas awarded identical acreage to US Murphy Oil and its own subsidiary, Petronas Carigali.

The leaders of the two Muslim nations also agreed to promote further cooperation in such areas as tourism, Islamic banking and production of "halal" food for Muslims.