Malaysia today rejected a protest from Indonesia for granting Shell an oil exploration concession in an area claimed by Jakarta, saying the bloc was within Malaysian territory.

State oil company Petronas on Feb 16 granted Shell a concession in the Sulawesi Sea between the two countries. Indonesia says the area is part of its territorial waters and has sent a formal protest note to Malaysia.

Malaysian Prime Minister Abdullah Ahmad Badawi said the concession was within his country's waters.

"The people at Petronas know that the area is within our territory. If the area is somebody else's, why should Petronas go in there?" he was quoted as saying by the official Bernama news agency.

The foreign ministry would reply soon to Indonesia's protest, he added.

Foreign Minister Syed Hamid Albar stressed it was within Malaysia's jurisdiction to award the concessions but said the government would strive to resolve the dispute amicably.

"This is our area and we want to proceed in giving concessions," he said.

Acceptable solution

"At the end of it, we have to find a solution that is acceptable. As far as we are concerned, we have done on the basis of our understanding what is within our right, maritime right, in order to issue those concessions."

Jakarta has blasted Petronas' action, saying it was unlawful as the concession was granted based on a map Kuala Lumpur had unilaterally drawn up in 1979, that was never recognised by Indonesia or a few other Southeast Asian countries.

Unlike Malaysia, Indonesia said it had granted concessions in the Sulawesi Sea to various oil companies including Shell since the 1960s in accordance with its internationally recognised territorial rights.

Indonesia and Malaysia previously disputed the ownership of two small islands in the Sulawesi Sea, which is between Indonesia's East Kalimantan province and the Malaysian state of Sabah.

But in December 2002, the International Court of Justice concluded that the islands -- Ligitan and Sipadan off Borneo island - belong to Malaysia.