Brunei and Malaysia continue to discuss oil sharing formula

Malaysia has offered an oil sharing formula to Brunei to resolve the drilling dispute in the Sultanate's offshore waters, reliable sources said. It said Brunei was considering the matter. Both parties are inclined to come to an amicable settlement, sources added.
Leaders of both countries met to discuss the issue and some progress has been reportedly made. Meanwhile, the French operator Total has been forced to abort its planned exploration drilling off Brunei Darussalam at the 11th hour. The drilling was aborted following intervention from the Malaysian government, which disputes the sovereignty of the waters.

Total had been preparing to spud a wildcat well on its deep-water Block J production sharing contract and actually had its chosen rig on location when the Malaysian Navy turned up to put a stop to its operations. There followed a few days' stand-off when the Bruneian Navy came to lend its support to the French. However, the Malaysian government apparently got the upper hand, and Totalelected to stop its planned drilling.
The explorer had lined up Transocean semi-submersible Sedco 601 for the 30-day well -- it already had the rig on charter -- plus it had awarded related service contracts to companies, including Baker Hughes, Maersk and Seacor. The operator has now declared force majeure and cancelled almost all of these contracts, leaving some of the companies out of pocket, an industry source said.

In what one observer described as "more egg on Total's face", US independent Murphy Oil is currently drilling a well using another Transocean unit, the drillship Discoverer 534, near to its Kikeh discovery well in Malaysian waters. The Kikeh oilfield, which has recoverable reserves of up to 700 mm barrels, is believed to extend into the disputed acreage.
"You could clearly see one rig from the other, they were that close," Upstream was told.
The Sedco 601, which was on a day rate of $ 87,000, will now be towed to Singapore arriving in May. The rig had recently completed drillingan exploration well at the operator's deep-water Donggala PSC off East Kalimantan, Indonesia. The well, officially a tight hole, was disappointingly a duster, industry sources said.

Maersk, which had supplied vessels for the latest hole, has also been left in difficulties. While one of its vessels was already working in the region prior to Total's job, the Danish contractor's Maersk Beater had left the North Sea specifically to support the Bruneian drilling programme at a day rate in excess of $ 30,000 with the mobilisation cost factored in.
Seacor is the only contractor not to have been hit too hard despite having its vessel tied up on location for almost a week while the Malaysian and Bruneian governments negotiated behind the scenes. It had a lump-sum contract to tow the rig to location and is now taking it to Singapore.

Total earlier had its site survey vessels driven away by the Malaysian Navy. A company insider earlier told that it would not have signed the PSC for Block J had it not been assured by the sultanate that sovereignty was not in doubt. Partners in the Block J PSC are operator Total with 60 %, BHP Billiton 25 %, and Amerada Hess 15 %.
The Malaysian authorities maintain that Block J and adjacent Block K, for which a Shell-led consortium is negotiating a PSC with Brunei, lie in its territorial waters. A couple of months before the French company signed for Block J in March, Malaysia awarded two blocks -- designated L and M -- to Murphy. These blocks off Sabah virtually overlap the Block J and K PSCs which, according to Brunei, are located in its exclusive economic zone.