Continental's Bengara-II Block Outside Disputed Area

Continental Energy says that its Bengara-II Block production contract area is not within the area which has recently become the subject of a territorial boundary dispute between Indonesia and Malaysia.

Continental Energy has received enquiries from the press and from some shareholders voicing concern that Bengara-II Block lies within an offshore area of NE Kalimantan that is the subject of an escalating boundary dispute between Malaysia and Indonesia. Although nearby, the Bengara-II Block is located mostly onshore and partly offshore about 25 miles west of the disputed zone. The Bengara-II Block is completely outside the disputed region and lies wholly within Indonesia.

The dispute involves two offshore Indonesian production sharing contract concession areas, the Ambalat Block and the Bukat Block, which partly overlap two offshore production sharing contract concession areas offered by Malaysia as its Sabah-Y and Sabah-Z Blocks (see map). The disputed area lies a few miles offshore from the island of Borneo and northeast of the Indonesian province of East Kalimantan and southeast of the bordering Malaysian state of Sabah.

This dispute is gaining much press since credible rumors of two significant oil and gas discoveries this year on the Ambalat Block by Italian oil giant ENI and its American partner UNOCAL. Fueling the dispute is an application by Shell for the overlapping Malaysian Sabah-Y and Sabah-Z Blocks. Earlier this month the President of Indonesia visited the Ambalat Block and Indonesia has stepped up air force and navy patrols of the disputed area. Indonesian and Malaysian authorities have met recently in Jakarta and agreed to amicably resolve the dispute.

Continental's President, Richard L. McAdoo, said of the dispute from Jakarta: ``The Bengara-II Block is not involved in the disputed area. We expect the dispute to be resolved soon as there are several notable precedents for resolution of similar disputed areas in SE Asia. We view the rumors of the new Ambalat Block discoveries as good news for our nearby Bengara-II Block. Any major new discoveries should increase awareness and attractiveness of the oil and gas potential of Indonesian NE Kalimantan. Although an oil producing area for well over 100 years, there has not been a major new discovery in NE Kalimantan since the early 1980's and given the geology of the area we are confident there are several more to come. We are finalizing plans to drill 4 exploration wells starting later this year on our Bengara-II Block and our expectations are buoyed by the Ambalat Block news.''