It lies to the south-east of the Malaysian state of Sabah and to the east of the Indonesian province of North Kalimantan, and it is the subject of a territorial dispute between the two nations.

[1] The dispute over the Ambalat stretch of the Celebes Sea began with the publication of a map produced by Malaysia in 1979 showing its territorial waters and continental shelf.

The map drew Malaysia's maritime boundary running in a southeast direction in the Celebes Sea from the eastmost point of the Indonesia-Malaysia land border on the eastern shore of Sebatik island, thus including the Ambalat blocks, or at least a large portion of it, within Malaysian territorial waters.

During the International Court of Justice (ICJ) case over the sovereignty of Sipadan and Ligitan islands, Indonesia argued from the perspective of historic bi-lateral Agreements between Britain and the Netherlands over the issue of possessions.

Indonesia lost the ICJ case on the issue of "effective occupancy", which was considered to over-rule the established agreements and the two islands were awarded to Malaysia.

However, Malaysia contends on occasion Takat Unarang is no more than a submerged rock and therefore not a valid basepoint for generating maritime claims to jurisdiction.

[6] In late 2002, the ICJ awarded the two islands to Malaysia based on "effective occupation" (effectivités) rather than de jure ruling.

[7] The ICJ decision had no bearing on the issue of the Indonesia-Malaysia maritime boundary in the disputed area of the Sulawesi (Celebes) Sea.

UNCLOS, Article 77 ensures confirming maritime territory of a coastal state secures sovereign rights for exploration and exploitation, which "do not depend on occupation, effective or notional, or on any express proclamation".

Partners will acquire and process 800 square km of new 3D seismic data and drill one wildcat with minimum financial commitment for the block at US$13 million.

In March 2005, Indonesia accused the Malaysian navy vessel, KD Rencong (38), of ramming its military ship, KRI Tedong Naga (819).

Lt. Col. Toni Syaiful, commander of the Indonesian Navy Eastern Fleet stated, "[Despite] being warned twice, they just moved away several meters.

[22] As of June 2009, Indonesia had stationed 7 of 30 warships of the Eastern Fleet Command on active notice in the area, according to Indonesian Navy Chief Adm. Tedjo Edhy Purdijatno.