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Sunday May 9, 2010

A tale of two oil blocks

The 2009 agreement between Malaysia and Brunei over territorial dispute has come under intense criticism for supposedly putting the former at a disadvantage. But is the picture being painted the correct one?

THE historic Exchange of Letters between Brunei and Malaysia, which ended two decades of territorial dispute between the two countries, was controversial from the day one.

Reporters who covered the March 16 event in Brunei last year and had filed their stories with their respective papers were stumped on their flight home – headlines like “Brunei denies Malaysia’s Limbang story” and “Limbang issue never discussed” were splashed across Bruneian newspapers available on the plane.

Just two days before, then Prime Minister Datuk Seri Abdullah Ahmad Badawi had signed the Exchange of Letters (essentially an agreement between countries) and had proudly told newsmen that Brunei had dropped its claim over Limbang in Sarawak as a result of the agreement.

But the Bruneian newspapers, quoting Brunei’s Foreign Affairs and Trade Minister II Pehin Lim Jock Seng, effectively denied Abdullah’s version of the agreement.

A little more than a year later, the agreement is still creating controversy.

This time, not only is the status of Limbang being questioned. The other major point of the agreement, that concerning the dispute over maritime territories, beneath which could lie billions of ringgit worth of oil and gas, is also being scrutinised.

The severe lack of information concerning the agreement has created opportunities to fan confusion and emotions among Malaysians. But thanks to the recent prodding by Tun Dr Mahathir Mohamad, the Government has been forced to let more details out into the public domain.

With the information now available, it may be possible to see if Malaysia has benefited from the deal, or otherwise.

Let’s deal with the Limbang issue first. Brunei’s Lim was right to say that nowhere in the 2009 agreement was the word “Limbang” mentioned.

Reacting to Brunei’s denial, Datuk Seri Dr Rais Yatim, who was then Foreign Minister, confirmed that Limbang was not mentioned in the agreement.

“But what was agreed to was for five historical border treaties between Brunei and Sarawak to be adhered to. This effectively makes the Limbang issue no more,” he said.

Two of the five treaties – one signed in 1920 and the other in 1933 – directly concerned Limbang. They established the border between Limbang and Brunei where it is today. As the border now places Limbang inside Malaysia, Brunei’s act of agreeing to follow the two agreements effectively means it agreed to let Limbang remain Malaysian. Once the demarcation of the border is completed, Limbang would be without question part of Sarawak.

So why the initial uproar by Brunei? One view is that it was not too happy with Malaysia quickly saying that it had got Limbang. It is extremely sensitive to the Bruneians as its loss in 1890 resulted in the Sultanate being split into two parts.

“Furthermore, they did not go around thumping their chests saying that they now got the oil that we wanted,” one commentator said. Nevertheless, he pointed out that Brunei’s Lim did not actually deny the statement that the Sultanate had dropped its claim over Limbang, indicating that there is no doubt that the claim had been dropped.

One of the points raised recently was whether Limbang was worth trading for the two oil-rich blocks. While the suggestion of such an exchange is wrong to begin with, the importance of Malaysia getting the isolated Limbang district should still not be downplayed.

A rather interesting but possibly exaggerated scenario was given by a historian. Brunei’s claim over Limbang, he pointed out, is based on the “unfair treaty” of 1890 between its Sultan and the White Rajahs of Sarawak.

“Brunei lost Limbang in an unfair treaty. But there is a school of thought that all treaties between the White Rajahs of Sarawak and Brunei, which resulted in Brunei losing the whole of Sarawak and the west coast of Sabah, were also unfair.

“After Limbang, could Kuching – or Kota Kinabalu for that matter – be claimed?” he queried.

Maritime territorial claims

Let’s move on to the maritime territorial claims and the two oil blocks.

Malaysia’s claim over the stretch of South China Sea where the two oil-rich exploitation blocks – named Blocks L and M by Malaysia (but were named as Blocks J and K by Brunei) – are located, and which Brunei claims to be its exclusive economic zone, has been described as akin to a person claiming ownership of the front yard of his neighbour’s house.

In 1979, Malaysia published a map showing its maritime territories. Whether rightly or wrongly, the map denied Brunei most of its territorial waters.

The UN Convention of the Law of the Sea (Unclos), of which both Brunei and Malaysia are signatories, gives all countries with coastlines the right to claim territorial waters up to a certain distance from the coastline. Malaysia’s 1979 map clearly did not conform to that provision as far as Brunei’s right to territorial waters was concerned.

It took four long days after the controversy blew up – after Abdullah and Petronas had issued statements – for Malaysia’s Foreign Ministry to state unequivocally that Malaysia’s dropping of its claim over the two oil blocks and the rest of Brunei’s territorial waters was based on sound international law.

There was no “signing away” of the two blocks because Malaysia could never have owned them in the first place. It would now seem unlikely that the two blocks could have been a major bargaining chip for Malaysia to get Limbang.

Malaysia awarded a concession over the two blocks to Petronas Carigali and Murphy Oil in 2003 as an assertion of its claim over the area, just as Brunei awarded concessions to six international companies to assert its claim over the same area.

But because of the dispute over sovereignty, none of the companies could start drilling for anything.

In March 2003, Murphy’s boat was chased away by a Bruneian gunboat and the following month, the Malaysian navy sent several gunboats into the area to block the arrival of a ship owned by Total, one of the companies awarded the concession by Brunei.

It was clear that not a drop of oil or a whiff of gas could be extracted from the area without the deadlock being resolved.

For more than half of the duration of the dispute, Dr Mahathir was Prime Minister. Going by what he has been saying recently, it is no surprise that there was no breakthrough in negotiations during that time.

However, as the realisation that no one would gain if the deadlock continued, pressure to move on started mounting.

A senior diplomat familiar with the negotiations said one of the things which broke the deadlock was when Malaysia indicated that it was willing to “discuss” its claim over the disputed waters.

Compromises were made by both sides and, because of the spirit of neighbourliness and close cultural ties, the matter was finally settled in late 2008. Malaysia recognised Brunei’s ownership of the disputed waters while the legality of the land border between Sarawak and Brunei – with Limbang remaining in Malaysia – would no longer be raised again by Brunei.

Despite Brunei becoming the owner of the oil and gas from the two blocks, the 2009 agreement allowed Malaysia to jointly exploit the resources of the area for 40 years. Petronas has confirmed that it has been invited by Brunei to take part in the development of the area.

Unlike two other existing “sharing agreements” – that between Malaysia and Thailand, and Malaysia and Vietnam – the one with Brunei is unique. In the two earlier cases, sovereignty of the overlapping area is still in dispute but with Brunei, this issue has been settled.

The cake is Brunei’s but Malaysia’s got a significant slice of it. More importantly, after waiting for 20 years, the two countries no longer need to wait further to start eating it.

Leong Shen-li, the senior news editor in The Star, is one of the reporters who covered the signing of the Exchange of Letters. He also has a big fascination for border disputes.

1890: Brunei gives up Limbang to Sarawak’s second White Rajah Charles Brooke, splitting the Sultanate into two parts.

1979: Malaysia publishes map of its territorial waters. Map denies Brunei of any territorial waters in the South China Sea beyond the depth of 100 fathoms (182m), leaving Brunei with just a narrow strip of territorial waters, and claims the entire area beyond 100 fathoms as belonging to it.

1984: Brunei gains independence from Britain. It claims a 200 nautical mile exclusive economic zone which overlaps with the territorial waters claimed by Malaysia as shown in the 1979 map.

2003: Malaysia awards Petronas Carigali and Muphy Oil production contracts for the disputed Blocks L and M which lie within areas claimed by Brunei. Brunei also awards production contracts to Total, BHP Biliton and Hess for one block, and to Shell, ConocoPhilips and Mitsubishi for the other block.

March 2003: Brunei gunboats chase away Murphy Oil’s boat. One month later, Malaysian Navy gunboats prevent a Total boat from entering disputed area. All exploration work is suspended by both sides.

2009: Brunei and Malaysia sign Exchange of Letters to settle their land and maritime territorial disputes after more than 30 sessions of negotiations.

With the 2009 Exchange of Letters, Brunei and Malaysia agreed to establish their common border in two ways:

> By following five border treaties which were signed between 1920 and 1939.

> By filling the gaps not covered by the five treaties by following the “watershed” principle. This effectively means that there would not be any major deviation from the current border between Malaysia and Brunei. As Limbang is currently in Malaysian hands, there would be no change in its status once the demarcation process is completed.

1. The 1920 treaty establishes the eastern boundary of Limbang with Brunei along the entire length of the Pandaruan River.

2. The 1933 treaty establishes part of Limbang’s western boundary with Brunei along the watershed of the Brunei and Limbang Rivers “until a point west of Gadong Hill”.

3. The 2009 Exchange of Letters will fill in the gaps in the border according to the watershed principle.

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