Despite efforts to control the problem, the volumes of mud being discharged are increasing, according to reports in the Jakarta Post.

Santos has an 18% interest in the onshore exploration well – Banjar Panji-1 – located in the Brantas PSC (production sharing contract) near Surabaya, East Java.

“Santos has been advised by the operator, Lapindo Brantas Inc, that on May 29, 2006, a well control incident occurred,” the company said yesterday.

“A flow of mud and water has been escaping to the surface from a series of nearby vents since the incident occurred. The flow has affected a significant area.”

Javanese media reported that more than 5000 people had been displaced and 500 had been admitted to hospital in the Porong district since May 29 for respiratory problems caused by inhaling hydrogen sulfide.

Indonesian President Susilo Bambang Yudhoyono has called on authorities to investigate the cause of the flow and punish those responsible, according to Indonesian reports.

Lapindo and local authorities are implementing programs to mitigate effects of the foul-smelling mud flow on the local community and the environment, and to stop the flow from the vents, according to Santos.

“The cause of the incident is being jointly investigated by Lapindo and the Government of Indonesia’s oil and gas regulator, BPMIGAS,” the company said.

Lapindo parent company EMP said the incident had been triggered by the May 27 earthquake in Yogyakarta and Central Java.

But the Natural Disaster Study Center in Surabaya, said this was not possible as the earthquake had barely affected East Java.

Government sources have told Indonesian media that the disaster appears to have been caused by lax drilling practices.

Santos said it maintained appropriate insurance coverage for these types of occurrences.

Lapindo has reportedly paid 200,000 rupiah ($A29) to each of the 360 families displaced by the mudflow.

Interests in the Brantas PSC are Lapindo (50%), PT Medco E&P Brantas (32%) and Santos (18%).