Malaysian Prime Minister Anwar Ibrahim on Tuesday said Beijing had expressed concerns about energy activities by Malaysian state firm Petronas in the South China Sea, even though Kuala Lumpur believes the projects are in its territory.
Anwar's remarks come after he opened the door for negotiations with China earlier this week, in a sign of mounting pressure on Malaysia's energy operations in waters that Beijing claims as its own.
China claims sovereignty over almost the entire South China Sea, through which about $3 trillion worth of ship-borne trade passes annually. Malaysia, Brunei, the Philippines, Taiwan and Vietnam have some overlapping claims.
Petronas operates oil and gas fields within Malaysia's 200-mile exclusive economic zone (EEZ) and has in recent years had several encounters with Chinese vessels.
China was worried that "Petronas has carried out a major activity at an area that is also claimed by China," Anwar said, responding to a parliamentary question about his discussions on the South China Sea during his visit to China last week.
"I stressed... that Malaysia sees the area as Malaysian territory; therefore, Petronas will continue its exploration activities there," Anwar said, without specifying an offshore project or a location.
But Malaysia is open for negotiations "if China feels this is their right", Anwar said.
China would like to work with Malaysia to handle differences in the South China Sea through dialogue and consultation in an appropriate manner, its foreign ministry said on Tuesday.
Petronas declined to comment.
China claims its territory via a "nine-dash line" on its maps, which cuts into the EEZs of Vietnam, the Philippines, Malaysia, Brunei and Indonesia.
The Permanent Court of Arbitration, however, ruled in 2016 that the nine-dash line, which stretches as far as 1,500 km off its coastline, has no legal basis.
U.S. think tank, the Asia Maritime Transparency Initiative (AMTI), last week said a Chinese coast guard vessel was for the past month operating near Petronas' Kasawari gas development off Malaysia's Sarawak state, and came as close as 1.5 miles of the project. A Malaysian navy ship was in the area, AMTI said.
China foreign ministry on Monday said they were not aware of the specific incident but said the conduct of the China coast guard is beyond reproach.
The Kasawari field holds an estimated 3 trillion cubic feet of gas reserves and is expected to start production this year.
Anwar, in his parliamentary comments, said China believes its ships were in international waters.
Malaysia's foreign ministry will issue a protest note if there were "collisions" between Malaysian and Chinese vessels there, Anwar said.
In response, the Chinese foreign ministry said Beijing safeguards its "legitimate rights and interests" in the South China Sea.
(Reuters - Reporting by Rozanna Latiff; additional reporting by Laurie Chen in Beijing; Writing by A. Ananthalakshmi; Editing by Martin Petty)