Part of Medco's oil field in Nunukan also claimed by Malaysia

At least five percent of Medco Energy International's oil fields off the coast of Nunukan island, East Kalimantan have been claimed by the Malaysian government as part of its territory, Medco's president director Hilmi Panigoro has said.

"About five percent of our concession especially those located in the northeast are also claimed by Malaysia, but Unocal might loss a larger part of its concession due to the Malaysian claim," he was quoted as saying by Investor Daily on Monday.

He, however, said that the company's exploration activities would continue despite the claim. According to him, most of the deep-sea area located in the Makassar Strait is quite promising for oil and gas exploration especially after Unocal found huge oil and gas reserves in the area several years ago.

The Malaysian government's recently awarded a production sharing contract to British-Dutch oil giant Shell and a subsidiary of Malaysian state owned oil and gas company Petronas to explore oil and gas in the Ambalat oil block off the coast of Nunukan island. The move has undermined the two countries' good relations.

The Indonesian government awarded similar oil contracts to Unocal and Italian firm Eni in the area long before the Malaysian government signed the contracts for Shell and Petronas. Both countries have recently sent warships near the disputed oil rich deep-sea location.

The oil and field blocks in question are near Sipadan and Ligitan islands, disputed over years by Indonesia and Malaysia. The International Court of Justice gave Malaysia sovereignty over the islands in 2002. But Indonesia claims Malaysia's water territories only 19 kilometers (12 miles) from the islands. (*)