Water and mud continues to flow erratically from the breach at rates estimated to range between 100,000 and 150,000 cubic metres per day.
In August, Santos said it had made provision for $A24.3 million to cover its share of remediation and related costs of $US100 million ($A132.5 million). This provision equates to roughly A4.1c per Santos ordinary share prior to any potential insurance recovery
But Lapindo presently estimates the total costs for drilling relief wells and mud management to be about $US180 million. With the flow continuing, the complexity of the event and the dynamic nature of the ongoing work, it was not yet possible to accurately estimate a total rectification cost, the company said.
Based on Santos’ 18% participating interest in the Brantas PSC, and prior to any potential insurance, this higher figure equates to about $A43.7 million, or 7.4c per Santos ordinary share.
Santos said it would continue to work with the operator to determine the estimated total cost of the incident, and therefore to assess the adequacy of its provisioning.
Lapindo said yesterday the mud has affected a total area of about 400 hectares and eight villages. At times the mud has caused the local railway line and a major local toll road to be closed for cleanup and for public safety, but these are now functioning normally.
An extensive civil construction effort has been undertaken to construct a series of levee banks and holding ponds to contain water and mud flows. About 1400 army personnel are also involved in the effort to stabilise the levee walls and to increase the capacity of the mud containment area.
A report published by the United Nations’ Environment Program has found that the incident’s current impact on human health was considered to be low.
“Many media reports mistakenly state that the mud is ‘toxic’ or ‘poisonous’, however this is not supported by scientific data,” Lapindo said.
“Very minor amounts of hydrogen sulphide gas continue to be produced, but this rapidly dissipates in the atmosphere and does not threaten nearby communities. The Ministry of the Environment now believes that the mud can be safely disposed without treatment directly into the environment.”
The company also said it had engaged several highly experienced local and international contractors to continue with its relief well drilling efforts at the well site and had developed emergency plans to deal with immediate threats to local people and property.
The well in the Brantas production sharing contract in East Java’s Sidoarjo province, is operated by Lapindo, which has a 50% working interest in the PSC. The other parties are PT Medco E&P Brantas (32%) and Australian major Santos (18%).
On May 29, the well was drilling at 9297 feet (2833.7m) when steam, water and mud and gas were seen venting to the surface some 200m away from the drilling location.
On September 27, Indonesian President Susilo Bambang Yudhoyono presented guidelines to the National Mudflow Mitigation Team (Tim Nas) under which families around the affected area would be resettled, as the land was no longer fit for human habitation and was considered to be a “disaster zone”, and infrastructure around the incident site such as the toll road, gas pipeline and railway should be relocated.
The guidelines also dictated that because the mud was not toxic, efforts should be made to monetise and find practical uses for it and the mud should be diverted to the sea via the Porong River.
“Discharge into the Porong River is the most viable and effective solution for short-term emergency relief, to prevent further flooding of communities, farming land and industry,” Lapindo said.
“The Institute of Technology Surabaya is working with Lapindo and Tim Nas to minimise any effects on the ecology of the river caused by the discharge. A number of ecological and hydrological studies are continuing to ensure that the discharge is undertaken in the most ecologically sustainable manner.
“Development of plans for the establishment of long-term environmentally sustainable solutions concerning mud disposal and rehabilitation of the affected areas is currently underway. These plans are being developed in collaboration with Tim Nas.”
About 3300 families whose dwellings have been flooded or threatened with flooding have been relocated. Lapindo said it was working with Tim Nas and government and community groups to see that their needs are being met and a plan was now being developed for permanent relocation.
“People displaced by the incident have been relocated into more permanent housing utilising the rental assistance (which also includes six months of food assistance) offered by Lapindo,” the company said.
Lapindo was helping provide emergency housing and meals and helping relocated businesses and provide compensation for any losses suffered.
The company said an observation well had been successfully drilled and has provided valuable technical data. Two relief wells are planned, the first of which is currently drilling at about 2300ft. Final preparations for the second relief well are underway. It is expected to spud in about two weeks.
“The company expects that the relief well operations designed to stop the underground flow will be completed around the end of 2006,” Lapindo said.
Lapindo has made claims under the joint venture insurance policies of its insurers and expects payment of $US27.5 million by these insurers in stages over the next few months.
