Senior officials from the two countries will meet on 22 July for the discussions.

Tensions reached such a level that a Malaysian navy patrol boat chased a Total exploration vessel away from the area. Total has since stopped all offshore work at the disputed Block J.

Block J is one of two deepwater blocks that are considered important to help Brunei maintain its current levels of oil and gas output in the future.

The country currently relies on oil and gas sales for 75% of its revenue and Brunei Shell Petroleum, the country's largest oil and gas producer, is expected to see production levels fall at several of its shallow-water blocks over the coming decade.

Brunei also claims the area is wholly within its EEZ, which stretches 200 nautical miles out from its shore, in a northwesterly direction.

The Malaysian National News Agency reported that Deputy Prime Minister Datuk Seri Abdullah Ahmad Badawi said Malaysia hoped that the talks would produce an outcome that would benefit both countries.

"The form of settlement depends on the outcome of the discussions. We cannot speculate on what form it would take.

"The principle must benefit both sides and lead to something good that will not affect bilateral ties between Brunei and Malaysia," said Badawi.