The accord will outline the continental shelf boundary and provides a basis for additional oil and gas exploration in the Natuna sea area, located east of the Malaysian peninsula and north of the island of Borneo.

The area is considered highly prospective with an estimated 2.5 trillion cubic feet of natural gas reserves. Indonesia began production from the area two years ago after finalising supply contracts with Singapore.

The only dispute over the agreement came from the Natuna district government which is demanding a fair portion of the profits that the Indonesian central government collects from islands' oil and gas products.

The agreement itself was part of a wider economic and social cooperation deal between the two countries, finalised during a visit to Vietnam by Indonesian President Megawati Sukarnoputri.