Indonesian energy company plans to resume drilling near mud volcano

Reuters News
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Posted: Jan 12, 2016 10:24 AM

By Fergus Jensen

JAKARTA (Reuters) - Indonesian energy company Lapindo Brantas plans to resume drilling for gas near the site of a mud volcano, its CEO said, referring to a disaster that some scientists say it helped to create around 10 years ago.

The Sidoarjo mud volcano, which started erupting in May 2006 near Indonesia's second-biggest city of Surabaya, inundated 12 villages and has displaced around 60,000 people. It has now become a tourist attraction.

The company, a unit of Energi Mega Persada, has paid off the vast majority of compensation claims it was ordered to pay, helped by a 786 billion rupiah ($56.5 million) government loan last year.

Now, it needs to resume drilling partly to pay back its debts to the government, CEO Tri Setia Sutisna said on Tuesday.

"This shouldn't be a problem because even the vice president of Indonesia has said Lapindo must drill," Sutisna told Reuters, referring to Vice President Jusuf Kalla.

The new wells would be drilled around 4 kilometers from the site of the mud volcano and would go to a maximum depth of about 1,200 meters, around one-third as deep as the well Lapindo was drilling in 2006 which some scientists linked to the disaster.

Lapindo has denied accusations of negligence, saying the mud disaster was triggered by tectonic activity.

The company has not drilled any new wells since the mudflow began, and as a result its gas output has fallen around 90 percent from 2004 levels, Sutisna said.

Lapindo wants to start drilling the two wells in early March, and it expects them to produce 5 million standard cubic feet per day (mmscfd) of gas each, bringing average output to around 18 mmscfd.

But Lapindo's latest plans may be held up by a temporary stoppage in preparations imposed by the government late last week amid public concerns.

"The community response was quite negative," Energy Minister Sudirman Said told reporters, noting the company was still "quite a long way" from starting drilling.

Said added the government's job was to ensure the company met technical as well as social and environmental requirements.

"They may well say it is safe from a technical perspective, but companies must pay attention to other matters," he said.

The government has not provided an estimate on when it might allow drilling to begin.

The mud volcano has been a source of embarrassment for the government, since Lapindo is linked to the Bakrie Group, controlled by the family of Indonesia's former Chief Welfare Minister Aburizal Bakrie.

(Additional reporting by Wilda Asmarini; Writing by Fergus Jensen; Editing by Mark Potter)