The most important challenge for Brunei in 2003 was resolving land and maritime border problems with its closest neighbour, Malaysia. Both sides tried to play down the issue but a flurry of meetings between the most senior leaders of the two countries attest to its gravity. A June meeting in Penang, Malaysia, between the Sultan and Malaysia’s Prime Minister, Dr Mahathir Mohamad, apparently focused on their competing national claims over oil-rich maritime territory. A visit by Malaysian Deputy Prime Minister Abdullah Ahmad Badawi to Brunei followed in early July. The Sultan went to Kuala Lumpur in August.

The maritime issue arises from Brunei offering exploration blocks to oil companies within its 200-km exclusive economic zone (EEZ), which Malaysia disputes, being prepared only to recognize Brunei’s continental shelf in waters up to 200 meters deep. The two countries have overlapping claims on the oil-rich areas at sea, and in early 2003 Malaysia sent its navy to chase away a Brunei-endorsed drilling team led by France’s oil company, Total. Instead, Malaysia offered the area to an American company, Murphy Oil, that had successfully drilled for a substantial amount of oil in the adjacent area outside Brunei’s declared EEZ. Under the protection of the Malaysian navy, Murphy Oil immediately started drilling in the area already allotted by Brunei to Total.

Two meetings between the Sultan and Mahathir have produced a temporary truce. Both sides agreed that all activities in the disputed area be halted until a solution was found to the problems. Malaysia has submitted an eight-point memorandum to Brunei. One of the reported options is to have a joint exploration of the area but ownership of the EEZ remains a thorny issue. Brunei, which depends for its future prosperity on oil and natural gas, would not easily give up its right to oil-rich maritime territory.