Indonesia urges Eni to develop disputed block

(Reuters) - Indonesia wants Italian oil group Eni to press ahead with developing the Bukat block in the Ambalat area off Borneo, where there is a border dispute with Malaysia, the energy minister said on Friday.

Indonesia has said Eni has found a big oil reserve in the Ambalat area, near Indonesia's border with Malaysia, that could produce 30,000-40,000 barrels per day (bpd) of crude oil.

Last October, the Indonesian minister said Eni was considering building a floating liquefied natural gas (LNG) plant in Bukat, as the operator also found natural gas there.

"The Ambalat area is Indonesian territory. All our programmes and planning will continue there. We want Eni to develop the Bukat block," Minister Purnomo Yusgiantoro told reporters.

Indonesia and Malaysia are embroiled in a long-running dispute over Ambalat, which is off the east coast of Borneo, and both sides have handed out contracts to major foreign firms in the area.

Indonesia awarded ENI a production sharing contract in 1999 and Unocal in 2004, which was later bought by U.S.-based Chevron , while Malaysia in 2005 struck an exploration deal with Royal Dutch Shell Plc and Malaysian state firm Petronas [PETR.UL].

The navies of both countries have faced off several times in recent weeks in the area, with Jakarta saying that it nearly opened fire on May 25 on a Malaysian patrol vessel.

Malaysia sent its armed forces chief Abdul Aziz Zainal to Jakarta this week in a bid to cool tensions. [ID:nJAK428633]

An Indonesian official at the energy ministry said Ambalat potentially had big oil and gas reserves.

"For oil reserves it may be at least 400 million barrels in Bukat alone," said the official, who declined to be identified.

Officials from Eni, which has not done any drilling in the Ambalat block so far because of the border dispute, could not immediately be reached for comment.

Yusgiantoro has said previously the the government has given full support, including security back-up if needed, for Eni's operations.

The development of the Bukat block could provide a much-needed fillip for Indonesia.

Southeast Asia's biggest economy has turned into a net importer of crude oil in recent years, as its failure to develop new fields quickly has led to a slump in production.

(Reporting by Muklis Ali; Editing by Ed Davies and Clarence Fernandez)