Kuala Lumpur: Malaysia's Petronas has started negotiations with the government of Brunei to develop two blocks offshore Malaysia after an earlier contract was terminated last month, the state oil firm said yesterday.
The offshore exploration areas, formerly designated as Block L and Block M, were awarded to Petronas and Murphy Oil in 2003 but were cancelled in April after Malaysia and Brunei agreed that the blocks were not part of Malaysia.
Long-standing issue
The agreement, executed through an Exchange of Letters in March 2009, was a culmination of a long-standing issue between the two countries.
The agreement now allows Petronas to enter into new production-sharing contracts for the blocks off Borneo island, which have been redesignated as Blocks CA1 and CA2, Petronas said in a statement.
"Petronas would like to clarify that following the Exchange of Letters, Petronas was invited by Brunei to enter into an agreement to develop Blocks CA1 and CA2 on a commercial arrangement basis," it said.
Petronas and the government of Brunei are now working out the terms of the commercial arrangement. Murphy said last week its potential participation in replacement production-sharing contracts covering these areas is under discussion.
Commercial basis
Former prime minister Abdullah Ahmad Badawi, who signed the deal with Brunei at the time, said in a statement last week that Malaysia would be allowed to participate in developing the two blocks on a commercial basis for 40 years.
He was responding to his predecessor Mahathir Mohamad who said the deal with Brunei cost Malaysia at least $100 billion (Dh367 billion) in oil revenues from estimated reserves of almost a billion oil barrels.
