The mudflow was very likely triggered by poor drilling practices on the Banjar Panji-1 gas exploration well.
The well operator, Lapindo Brantas, and one joint venture partner, Australian petroleum major Santos, are meeting cash calls for funding relief work. But the third partner, Indonesian company PT Medco, insists the blame lies solely with the operator and refuses to put money into relief efforts.
With the company refusing to meet cash calls, much relief work has ground to a halt while contractors seek firm financial commitments, according to reports in The Australian, The Courier Mail. The Age and the Australian Financial Review.
Banjar Panji-1 has created an artificial mud volcano, which has been disgorging between 50,000 and to 150,000 cubic metres of mud a day since late May. More than 420 hectares, eight villages and 3300 families have been affected.
Subsidence associated with the well is thought to have caused last month's rupture of a third-party pipeline that killed 13 people and injured dozens.
Lapindo says the disaster was triggered by an earthquake 300 kilometres away.
Santos has refused to speculate on the causes of the disaster, but various Indonesian authorities and media have dismissed Lapindo’s explanation, firmly laying the blame on lax drilling practices.
PT Medco shares this view. It alleges the disaster was caused by Lapindo failing to set well casing below 8500 feet. PT Medco has sought arbitration in New York.
Indonesia’s national mitigation team, in which Santos is not represented, is aiming to flush the mud down a nearby river to the sea in a bid to counter the effects of the disaster. Testing has shown that the mud is not toxic and options such as land reclamation or establishing a mangrove mudflat are being assessed.
"Santos is very concerned by the impact of the incident on the community and the environment," the company told the ASX on Friday.
"Support is being provided to the national mitigation team and Lapindo through timely and full payment of cash calls – with $US15 million paid by Santos to date.
"Cash calls are supporting the social, technical and environmental response efforts."
In October, the clean-up bill was estimated by Lapindo as likely to reach $US180 million ($A228 million). But this was before the pipeline explosion occurred and relief drilling ceased. With the rainy season about to begin, relief drilling is not likely to resume for months.
Lapindo recently admitted that the clean-up cost estimate might need "further adjustment". The adjustment would be made once the cost of infrastructure relocation, third-party claims and long-term mud disposal options were known, and until then, it was not possible to estimate accurately a total cost, the company said.
Santos' exposure to the estimated $US180 million clean-up cost is now $A43.7 million, or 7.4c a share. But if the bill blows out, so could Santos’ financial commitment. The Adelaide-based company said it has "appropriate" liability insurance, but it would not disclose the limit of this cover.
