Talks Between Brunei and Malaysia Inconclusive

Talks last week between Malaysia and Brunei failed to settle rival claim over a maritime border dispute offshore Borneo Island. Malaysia said the proposal made in May was its best offer and it was now up to Brunei to consider the proposal.

Exploration activities in the disputed area have been halted after the Malaysian navy earlier this year chased off a drilling team belonging to a consortium led by Total.

"The prime minister has made it very, very clear that we have submitted our proposal and that proposal is the maximum we can live with," Malaysian Foregin Minister Syed Hamid Albar told reporters. "It's up to Brunei to look at what we have said, so we will wait for their response," he said. "At this meeting, they did not make any final decision that will be lasting and durable."

The stakes in the dispute shot up last year after Murphy Oil made a sizeable discovery in a Malaysian block near the disputed area, and put preliminary estimates on the Kikeh field's recoverable reserves at 400 million to 700 million barrels. Syed Hamid declined to say whether the halt on exploration activities in the area would continue.

Malaysia has proposed a production-sharing agreement, according to a source in Brunei with knowledge of the sultanate's policymaking. But Brunei's U.K.-based advisers have warned such a pact may mean conceding Malaysia has territorial rights, the source said.

Brunei, a tiny nation of 330,000 people surrounded on all sides by Malaysia, lacks the muscle to back up its claim, however, and may lose more by digging in against its neighbor. Syed Hamid said there were areas both sides could agree on.

"I think we have moved nearer to a final solution," he said, adding it was possible to resolve the issue before Mahathir steps down in October.

Brunei's exclusive economic zone (EEZ) stretches 200 km (124 miles) offshore and the sultanate awarded exploration blocks.

But Malaysia bases its overlapping claim on possession of some tiny islands and reefs in the South China Sea, and argues that Brunei only has jurisdiction over its continental shelf, in water up to 200 m (656 ft) deep. About three-quarters of the EEZ is in deeper water.