The East Ambalat block, located off the east coast of Sabah, East Malaysia, falls within two areas dubbed ND6 and ND7 that Petronas was intending to award soon.
The disputed area, believed to be hydrocarbon-prospective, lies 100 kilometres to 150 kilometres off Tawau.
Malaysia's Foreign Minister Syed Hamid Albar said the government would prefer to resolve the territorial claims issue with Indonesia through dialogue rather than resorting to legal proceedings.
