Indonesia and Malaysia Reach Agreement on Oil

The leaders of Malaysia (search) and Indonesia (search) on Monday agreed to diplomatically resolve a growing dispute over an offshore oil field in an area where both countries have sent warships and planes in recent days.

Prime Minister Abdullah Ahmad Badawi (search) and Indonesian President Susilo Bambang Yudhoyono (search) talked on telephone Monday and they agreed that their foreign ministers will discuss the matter further, the two leaders announced separately.

The attempt to defuse the crisis came after Malaysia accused Indonesia of trespassing on its territory by sending a navy patrol ship to the oil field. Earlier, Indonesia sent F-16 fighter jets to the area.

Malaysia said the Indonesian ship had crossed about 8 nautical miles (9.2 miles; 15 kilometers) into Malaysian waters in the Sulawesi Sea (search), and that it sent a protest note to Indonesia.

"To prevent any undesirable incidents which may create tension in the relationship between Indonesia and Malaysia, both of us agreed for the matter to be discussed at the diplomatic level," Abdullah said.

"Hopefully, in this way, any problem faced will, God willing, be resolved in a cordial manner," he said in a speech.

Foreign Minister Syed Hamid Albar was scheduled to leave for a three-day visit to Jakarta on Wednesday for talks with his Indonesian counterpart Hassan Wirajuda to discuss the overlapping claims.

Yudhoyono called Abdullah just before leaving on a scheduled visit to an island near the disputed site in the Sulawesi Sea off Borneo Island.

"Solving the problem should be done any confrontation, especially armed confrontation," Yudhoyono told an audience of government bureacrats, local lawmakers and residents on Borneo.

Tensions started after Malaysia's national oil company, Petronas, awarded production-sharing contracts in February to two of Shell's Malaysian units and to Petronas Carigali Sdn. Bhd. for deep-water blocks ND6 and ND7.

Indonesia said the lucrative oil blocks are within its borders. In the past 10 days, both Malaysia and Indonesia have deployed warships to the area, each claiming violations of its airspace and territorial waters.

The oil blocks lie near Sipadan and Ligitan islands off Borneo, disputed for years between Malaysia and Indonesia.

The International Court of Justice handed Malaysia sovereignty over the islands in 2002. However, Indonesia claims that Malaysia's water territory extends only 19 kilometers (12 miles) from the islands. The exact location of the blocks has not been disclosed.

Syed Hamid said the Royal Malaysian Navy had stationed two warships in the area to monitor the situation and patrol within Malaysian waters, and reasserted a call for peaceful means to resolve the tensions.

Syed Hamid said Malaysia had also sent three protest notes to Indonesia on its awarding a production-sharing agreement contract to Unocal Corp. in November last year to explore and exploit oil and gas in the East Ambalat Block, also located in the disputed waters.