(Adds quote, background)
JAKARTA, April 17 Indonesia's energy minister said Italian oil group Eni (ENI.MI) has found a big oil reserve in Ambalat area, near Indonesia's border with Malaysia, that could produce 30,000-40,000 barrels per day (bpd) of crude oil.
Indonesia and Malaysia are embroiled in a dispute over the Ambalat region, which is off the east coast of Borneo island, and both sides have handed out contracts to major foreign firms in the area.
The discovery could provide a much-needed boost for Indonesia. Southeast Asia's biggest economy has turned into a net importer of crude oil in recent years, as the failure to develop new fields quickly has resulted in a slump in production.
"Eni has drilled several wells in Bukat block, near Ambalat, and it has found quite big reserves," Energy Minister Purnomo Yusgiantoro told reporters.
"We expect this discovery will boost Indonesia's crude oil production in future," he said.
Indonesia has been offering new exploration rights and financial incentives for oil fields in a bid to stem a steady decline in production.
Evita Legowo, director general of oil and gas at the ministry, said the government has asked Eni to make further tests to determine the reserves there.
"We have to be careful with this finding because of the location on the border. Based on early indications, Eni could produce between 30,000 bpd to 40,000 bpd there," Legowo said.
Eni operates several other oil and gas blocks in Indonesia, including in Sumatra and Makassar Straits.
It operates the Bukat block under a production-sharing agreement signed with Indonesia in 1998 and also has a production-sharing contract in Ambalat block that was signed in 1999. But Eni has not done any drilling in the Ambalat block so far because of the border dispute.
Yusgiantoro said the area concerned is part of Indonesia and that the government has given full support, including security back-up if needed for Eni operations.
Indonesia's crude production dropped to 832,200 bpd in March, compared with 844,300 bpd in February. Condensate output is up slightly to 123,000 bpd in March, compared with 122,000 bpd in February. (Reporting by Muklis Ali; Editing by Sara Webb)