Petronas Suspends Exploration Offshore Sarawak

Petronas has suspended exploration and production operations in the disputed Block L offshore Sarawak. The ongoing territorial dispute between Malaysia and Brunei has caused other operators to also temporarily suspend operations in the area. The disputed deepwater offshore site is part of an exploration area both Malaysia and Brunei are trying to develop. "We will not start work until the matter is resolved," Mohd Hassan Marican, Petronas President and Chief Executive Officer said on the sidelines of the 21st Asean Energy Ministerial Meeting in Langkawi, Malaysia. Petronas has completed an initial survey of two blocks and drilled one well. The company has stopped work to allow the two governments, Malaysia and Brunei, to sort out the dispute.

A production sharing agreement for the block was awarded in 2002 by the Brunei government and was signed in April by Total, BHP Billiton and Amerada Hess. Block J is within the Exclusive Economic Zone claimed by Brunei. The EEZ stretches 200 nautical miles out from Brunei's shore, in a northwesterly direction. Block J also overlaps Block L, exploration rights to which the Malaysian government has awarded to Murphy Oil and Petronas Carigali. The two sites are located next to the oil-rich Kikeh Block, which is already operated by Murphy Oil and Petronas and estimated to have recoverable reserves of 400 million to 700 million barrels of crude.