Brunei Gets Two Blocks

Dear Reader,

My sincere apologies for not updating this blog recently. Thank you for dropping by to read.

Introduction: The Two Blocks

Recently, ex-premier Tun Dr Mahathir in his blog, Che Det, raised the issue of why nobody raised eyebrows when two oil-rich blocks in Sarawak became part of the state of Brunei. The two offshore blocks, named Block L and Block M, have been claimed by Malaysia based on historical facts. The ex-premier described the two blocks as containing reserves of nearly "almost 1 billion barrels" and remarked that Malaysia stood to lose "at least USD100 billion (about RM320 billion)". (Ref: Tun Dr Mahathir's blog, 12th April 2010. Malaysia's Generosity.)

Tun Dr Mahathir had referred to three articles in his piece, namely:

1. The Edge, 22nd April 2010. Murphy Oil says Petronas terminates PSC for 2 blocks. Quote: "... following the execution of the exchange of letters between Malaysia and Brunei on March 16, 2009, the offshore exploration areas designated as Block L and Block M were no longer a part of Malaysia."
2. The Edge, 23rd April 2010. Two Murphy Oil-Petronas PSCs off Brunei terminated. Quote: "Murphy Oil Corporation’s production sharing contracts (PSC) for the offshore exploration areas designated as Blocks L and M have been terminated by Petroliam Nasional Bhd (Petronas) as they 'are no longer a part of Malaysia'."
3. The Brunei Times, 23rd April 2010. Brunei may soon start drilling in Blocks J and K. Quote: "Brunei can start drilling soon in offshore Blocks J and K as the Sultanate retains ownership of the two blocks under a deal made last year with the Malaysian government. ... Yves Grosjean, general manager of Total E&P Borneo BV and Total E&P Deep Offshore Borneo BV, in a telephone interview with The Brunei Times explained that Malaysia refers to Brunei's Blocks J and K as Blocks L and M."

Tun Dr Mahathir opined that the "substantial oil producing offshore area in the South China Sea, namely Block L and Block M", was given to Brunei in a settlement of long-standing competing claims over the town of Limbang. (Ref: ibid.)

Did Brunei Really Give Up Limbang?

On 16th March 2009, The Star reported that ex-premier Tun Abdullah bin Hj Ahmad Badawi had managed to reach a settlement with Brunei over the long standing issue of Limbang town. (Ref: The Star, 16th March 2009. Brunei drops claim over Limbang in Sarawak (Update3).) Here are a few relevant excerpts from the said report:

• In a historic move, Brunei has officially dropped its long-standing claim over Sarawak’s Limbang district, ...

• The dispute over Limbang can be traced back to the cession of the territory by Brunei to Sarawak's White Rajahs in 1890. The cession has been strongly disputed by the Sultanate which regarded the transfer as annexation by Sarawak.

• ... Abdullah and the Sultan in a joint statement said they had reached agreement over the final maritime boundaries between the two countries in the South China Sea.

• The dispute over maritime territory arose out of a 1979 map published by Malaysia which indicated that all deep sea territorial waters off the coast of Brunei belonged to Malaysia.

(For an alternative reading, please refer to the Brunei Times, 17th March 2009: Brunei drops all claims to Limbang)

However, on 18th March 2009, the Brunei Times reported that Brunei's Second Minister of Foreign Affairs and Trade, Pehin Orang Kaya Pekerma Dewa Dato Seri Setia Lim Jock Seng, clarified that "the issue of territorial claims over Limbang was never discussed in the agreements signed on Monday". From the said article:

"From a press report, (it was stated that) Brunei has accepted Malaysia's reported claim on Limbang or that it (Brunei) has dropped its claim (on Limbang). In actual fact, the issue of claims over Limbang was never discussed," Pehin Dato Lim said. "What was discussed is regarding the demarcation of land boundaries." ...

Quoting the joint statement, Pehin Dato Lim said that the demarcation of land boundaries would be resolved on the basis of five existing historical agreements between the governments of Brunei and Sarawak, and where appropriate, the watershed principle.

(Source: The Brunei Times, 18th March 2009. Limbang issue was never discussed: Pehin Dato Lim.)

On 26th April 2009, the Brunei Times again touched on the topic of Limbang, this time focussing on a little known report prepared by the British in 1903. The report, spanning 10 pages, was prepared by a British civil servant, H Conway Belfeld. (Ref: The Brunei Times, 26th April 2010. Early British intel report highlights Limbang legacy.) Belfeld seemed at that point of time to anticipate the possibility of Brunei being annexed by Rajah Brooke. In relation to Limbang, the following extracts are relevant:

• By 1905, the remnants of Brunei had already been cleaved in two, with Limbang forcibly taken by Rajah Brooke. Even though by then the British had not decided what to do with Brunei, McArthur's report had already recommended that Brunei be left as an independent nation and not be incorporated into Sarawak.

• At that time, Limbang was intertwined with Brunei and its loss not only crippled the resources of the government, but also affected trade and movement of people.

• Interestingly, Belfeld even recommended that should control of Brunei pass into hands other than those of its native rulers, the arrangement affecting such a change of administration should provide for the management of Limbang by the government of the state to which it properly belongs.

On 9th August 2009, the tale of how Limbang came to be annexed by Rajah Brooke was touched upon in a discussion of Bruneian history.

• Sultan Hashim sold his Tulin territories apparently in order to finance the Sultanate as it was becoming economically weak. British Charles Brooke used this critical moment to annex the area of Limbang in Sarawak.

• In his efforts to regain the land, Sultan Hashim asked for help from the Ottoman Sultan Abdul Hamid. In his letter to the Sultan of Ottoman, Sultan Hashim wrote, "My lands and the Religion of Islam have been destroyed by the infidel and one of my land named Limbang has been seized by the infidel, namely Charles Brooke in Sarawak." But the letter was never been received or read by Sultan Abdul Hamid after a British spy confiscated it.

• The British did not even assist Brunei in recovering Limbang; and now, Limbang is a thorn in modern Brunei-Malaysia relationship.

(Source: The Brunei Times, 9th August 2009. A century filled with upheavals. Also read more on this matter in the following article: The Brunei Times, 3rd August 2008. The Sultan who thwarted Rajah Brooke.)

On the 3rd of May 2010, The Brunei Times again touched on the Limbang issue. The newspaper's editorial celebrated the formal recognition that Brunei held sovereignty over Blocks J and K (or Blocks L and M, as Malaysians call them). At the same time, the editorial noted that Brunei did not admit that Limbang had been ceded to Malaysia. (Ref: The Brunei Times, 3rd May 2010. Mutual benefit the preferred way.)

• Limbang is another unresolved issue between the two countries. On March 19 last year, the Malaysian news agency Bernama quoted then Foreign Minister Rais Yatim as saying that the redemarcation of Malaysia-Brunei border would be carried out to resolve various border issues. Rais added that that the issue of Limbang would be regarded as resolved once the exchange of border agreements was finalised. "(The word) Limbang was not mentioned in the documents. It was the perception that when the matter of the five agreements (signed between 1920 and 1939) are resolved... the issue of Limbang will also be resolved...," said Rais then.

• Abdullah, confirmed this in his response to Dr Mahathir's accusation that he had traded the offshore oil blocks for Limbang (which Brunei denies) saying that both countries would conduct a joint survey and that where no land boundary agreement existed, the joint survey would determine the land boundary based on the watershed principle. "When the entire boundary demarcation exercise is completed, there will be established a final and permanent boundary between Sarawak on the Malaysian side and Brunei on the other side," said Abdullah.

Brunei today is smaller than it was a hundred years before. Parts of Brunei are now absorbed into the East Malaysian states of Sabah and Sarawak. An article on postal stamps during Japanese occupation of Brunei provides a clue:

• In Borneo, the northern part which comprised Brunei, Sabah and Sarawak was known as "Kita Borneo". Kita Borneo was placed under one administration with Kuching as its capital run by a governor by the name of Gun Shirekan Kakka, General Yamawaki.

• Brunei became one of five Japanese Prefectures in the former British Borneo or Kalimantan Utara. The Brunei Prefecture included Baram, Labuan, Lawas and Limbang which were all former Brunei territories. This was the only time during modern times that all these territories were recombined to form one Brunei.

(Source: The Brunei Times, 25th January 2010. Stamps during Japanese Occupation.)

Implications: Opposition Makes Noise

What is clear is that Brunei denies that it has given up its claims on Limbang. On the other hand, ex-premier Tun Abdullah Hj Ahmad Badawi has stated firmly that Blocks L and M are now part of Brunei's territory as part of the settlement of Brunei's claims on Limbang. This may mean that there has been no proper closure on the Limbang issue while Malaysia has given up Blocks L and M (or Blocks J and K, as Brunei refers to them). This may have led to a one-sided deal.

On 4th May 2010, PKR chief for Keningau and party vice president, Datuk Dr Jeffrey Kitingan, was reported questioning why Malaysia has not replied to Brunei's denial that it had given up its claims on Limbang. From the article at Free Malaysia Today:

"There is also a serious doubt whether the territorial dispute with Brunei on the sovereignty over Limbang was actually resolved because Brunei disclaimed any such surrender after the cession of Sabah maritime territory. There was no rebuttal form Malaysia on Brunei's disclaimer."

The younger brother of the state BN government's deputy chief minister Joseph Pairin, Kitingan said the big question now is whether surrender has achieved anything.

"If it has nothing to do with Limbang, why was the surrender made? Was the territory sold, how much money was involved, and who received it?

(Source: Free Malaysia Today, 4th May 2010. 'Why oil blocks handed over in secrecy?' A map of Brunei, Limbangan, and Blocks L and M is available at the article.)

Elsewhere, a native of Sarawak wrote to Free Malaysia Today to suggest that Limbang was more important than anyone had dared to imagine.

Why give away another part of Sarawak—a part that happens to be rich in oil—just to make Brunei drop its claim on Limbang? When did modern-day Limbang become part of Brunei?

Brunei may be claiming that Limbang belongs to it, but that does not mean it does.

Otherwise, the monarchy can use the same logic to claim all of Sarawak, which was Brunei territory until James Brooke secured the land for himself. (He later ceded it to Britain.)

(Source: Free Malaysia Today, 6th May 2010. Limbang issue: Time for a referendum?)

Even Yong Teck Lee, former Chief Minister of Sabah, could not resist joining the chorus of critics. Free Malaysia Today reported:

The contentious ceding of two oil blocks, which sit on Sabah waters, by the federal government to Brunei in March 2009 as part of a ‘deal’ to retain Limbang in Sarawak has cost Sabah RM16 billion in potential oil royalties, according to former Sabah chief minister Yong Teck Lee.

He said the oil blocks L and M sat on three million acres of Sabah’s maritime territory and apart from depriving the state of oil royalties based on former prime minister Dr Mahathir Mohamad’s estimates, the Cabinet decision was also unconstitutional.

(Source: Free Malaysia Today, 4th May 2010. Oil blocks deal: Huge financial loss for Sabah.)

Win-Win Situation?

On 3rd May, 2010, Tun Dr Mahathir on his blog again touched on the topic of Blocks L and M. He said: "I am glad that Petronas is going to take part in the exploration and production of the two blocks we surrendered to Brunei. That still does not mean we will get much out of the deal." (Ref: Tun Dr Mahathir's blog, 3rd May 2010. Not So Generous?)

On 1st May 2010, the New Straits Times had reported:

• Under a “commercial” agreement with Brunei, Malaysia can now jointly develop oil and gas resources in two areas previously under dispute by both countries. Although sovereign rights to the resources in what was known as Block L and Block M now belong to Brunei, Malaysia will be allowed to participate on a commercial basis for 40 years, said former prime minister Tun Abdullah Ahmad Badawi.

• “This means that the agreement was not a loss for the country as far as the oil and gas resources are concerned.” He added that the financial and operational modalities for giving effect to the arrangement would be further discussed by the two sides.

(Source: New Straits Times, 1st May 2010. Malaysia-Brunei deal on oil resources.)

On 1st May 2010 as well, The Star reported that ex-premier Tun Abdullah Hj Ahmad Badawi denied that he had signed away Malaysia's rights to oil exploration in Blocks L and M. Instead, the ex-premier was quoted saying "the agreement allowed Malaysia to join in the exploration of petroleum resources from two areas known as Blocks L and M" and the agreement was signed only after Cabinet had approved it on 11th February 2009. (Ref: The Star, 1st May 2010. Pak Lah refutes claims it was a deal with Brunei in ‘exchange’ for Limbang.) The ex-premier was quoted saying, "This means that in so far as the oil and gas resources are concerned, the agreement is not a loss for Malaysia" -- referring to the commercial arrangement which will allow Malaysia to participate in oil exploration at Blocks L and M for the next 40 years. (The matter was also reported in The Brunei Times, 1st May 2010. Brunei owns Blocks J and K, says Abdullah.)

By 2nd May 2010, The Star again reported that firstly, Blocks L and M had been renamed as Blocks CA1 and CA2; and secondly, Petronas has commenced negotiations with the state of Brunei to discuss commercial arrangements pertaining to Blocks CA1 and CA2. (Ref: The Star, 2nd May 2010. Petronas: Malaysia still has oil exploration deal with Brunei.) (Refer also to: The Brunei Times, 2nd May 2010. Petronas invited to develop 2 offshore oil blocks.)

On 3rd May 2010, Wisma Putra had issued a press release to say that international law recognises Brunei's rights to Blocks L and M (or Blocks J and K as they are known in Brunei).

• Malaysia’s oil concession Blocks L and M which coincided with Brunei Darussalam’s Blocks J and K are recognised under the Exchange of Letters as being situated within Brunei Darussalam’s maritime areas, over which Brunei Darussalam is entitled to exercise sovereign rights under the relevant provisions of the United Nations Convention on the Law of the Sea 1982 (UNCLOS 1982).

• The establishment of the CAA incorporating these Blocks provides for a sharing of revenues from the exploitation of oil and gas in the CAA between the two States.

(Source: The Star, 3rd May 2010. Brunei has sovereign rights over 2 oil-rich areas: Wisma Putra. Refer also to the original press release at the website of the Ministry of Foreign Affairs.)

On 3rd May 2010 as well, The Brunei Times reported that Malaysian Prime Minister, Dato' Sri Mohd. Najib bin Tun Haji Abdul Razak, was positive that the issue of Blocks L and M (or Blocks J and K, or more recently known as Blocks CA1 and CA2) could be amicably resolved. The Malaysian premier was quoted saying, "His Majesty Sultan Haji Hassanal Bolkiah Mu’izzaddin Waddaulah, the Sultan and Yang Di-Pertuan of Brunei Darussalam has always said he wanted to see a solution which is based on a mutually-beneficial formula." (Ref: The Brunei Times, 3rd May 2010. Najib sees win-win solution for both countries.)