The modern conflict traces to 1979, when Malaysia published a map of its territorial waters and continental shelf that drew a maritime boundary running southeast through the Celebes Sea from the eastern tip of Sebatik Island. The line enclosed the Ambalat blocks -- designated ND6 and ND7 by Malaysia -- within Malaysian territorial waters. Indonesia objected immediately. From Jakarta's perspective, the boundary was established by treaties between the British and Dutch colonial powers: specifically, the 1891 Convention that drew the border along the 4 degrees 10 minutes North parallel across Sebatik Island, and the 1915 Agreement that refined the land boundary through channels and watersheds. Indonesia maintains that these historical agreements placed the maritime boundary as a straight eastward continuation of the land border, putting the entire Ambalat block on the Indonesian side. Every ASEAN neighbor who saw the 1979 map rejected it. Malaysia published it anyway.

In 2002, the International Court of Justice awarded the nearby islands of Sipadan and Ligitan to Malaysia, ruling on the principle of "effective occupation" over Indonesia's argument from historical treaties. Indonesia lost the case but gained a legal argument: the ICJ decision explicitly had no bearing on the maritime boundary in the Celebes Sea. The sovereignty of two small islands did not determine who owned the seabed between them. Following the ruling, Indonesia amended its baselines, removing Sipadan and Ligitan as reference points and redrawing from Sebatik Island to Takat Unarang and three other points to the southeast. Malaysia contended that Takat Unarang was nothing more than a submerged rock, not a valid basepoint under the Law of the Sea Convention. The technical argument over what constitutes a rock, an island, and a low-tide elevation became the proxy for a dispute worth billions.

Both nations have awarded petroleum exploration rights in the same waters to different companies, creating overlapping claims with real money behind them. Indonesia moved first: Royal Dutch Shell received the Ambalat Block in 1999, with Italian company ENI taking over operatorship in 2001. American company Unocal was awarded the East Ambalat Block in 2004. Malaysia responded in February 2005, when Petronas awarded Production Sharing Contracts for Blocks ND6 and ND7 to Shell and Petronas Carigali, committing a minimum of $50 million to seismic surveys and wildcat drilling across 25,700 square kilometers of disputed seabed. Shell ended up with contractual obligations to both countries in the same waters. The dueling concessions transformed a territorial dispute into an active commercial conflict, with exploration crews and survey vessels from both sides operating in overlapping zones.

The Ambalat dispute has repeatedly come close to armed confrontation. In February 2005, Malaysian forces interrupted Indonesian construction workers building a light beacon on Takat Unarang, arresting and later releasing them. Indonesia announced plans to build twenty lighthouses in the area -- sovereignty declared through navigation infrastructure. By May 2009, Indonesia accused Malaysia of violating its maritime boundary nineteen times in a single month. On 25 May, a Malaysian fast-attack vessel entered waters Indonesia considered its own at 12 nautical miles from the coast. The commander of the Indonesian corvette KRI Untung Surapati, Captain Salim, ordered combat readiness after two warnings were ignored. The Malaysians withdrew. Indonesia stationed seven of thirty warships from its Eastern Fleet Command on active notice in the area. Since 1980, Indonesia has submitted thirty-six diplomatic notes of protest to Malaysia over maritime violations. The dispute remains unresolved, its final answer still lying somewhere between international law, colonial history, and the oil beneath the sea.