AFR: Santos understated East Java mud flow damage

Eric Watkins
Oil Diplomacy Editor

LOS ANGELES, Sept. 17 -- Santos Ltd. has rejected speculation suggested by a Sept. 15 report in the Australian Financial Review (AFR) that said: "Santos is facing a blowout in the clean-up bill from the world's largest mud volcano in East Java" because the "disaster cannot be contained." The article cited the United Nations Environment Program and AusAid, that it had understated the severity of the Sidoarjo mudflow incident in East Java.

"Santos is not in a position to comment specifically on the UNEP report," the Australian firm said in a statement. "However, given the conditions at site and current activities being conducted, Santos believes that the provision remains an appropriate estimate of its potential liability associated with the incident."

At the same time, Santo acknowledged that matters could change because "the situation remains dynamic, complex, and uncertain." As a result, Santos said it "will continue to review the adequacy of the provision in light of developments and available information."

The AFR referred to updated costs of $830 million (Aus.), which it said "are nearly 10 times higher than Santos has disclosed to the stock market, leading to accusations that the oil and gas major is deliberately playing down the disaster."

The paper said Santos has an 18% interest in PT Lapindo Brantas, which experienced drilling problems near the site the day before the mud volcano erupted.

"Presuming it paid 18% of mitigation costs," Santos is facing a cleanup bill of $355-829 million over the next 25 years, the paper said, citing the UNEP report.

In its report, the AFR said that impacts of the mudflow are increasing and that the authors of the report envisage three courses of action to mitigate them:

-- Pipe the mud to the sea at a cost of $1.9 billion over 25 years. But there are concerns that the material is too viscous and the pumps would not be able to move the required volume.

-- Pump the mud to a nearby river at a cost of $1.9 billion over 25 years. But there is strong local opposition to this method and concern about the increased flood risk.

-- Build an open canal that would slowly transport the mud to the sea at a cost of $4.6 billion.

The study, commissioned by the Indonesian government and carried out by UNEP and AusAid, says transporting the mud 14 km to the sea and creating a new wetland is the only mitigation option available. The UNEP report has yet to be made public.

The paper also said: "Santos has yet to admit liability for the disaster, which began after a drilling incident in May 2006, and it has paid almost no compensation to the 75,000 people involved."

While Santos said the cause of the disaster has yet to be determined, the AFR cited a June 2008 report by a team of US, British, and Indonesian scientists who expressed 99% certainty that "drilling caused the disaster."

Contact Eric Watkins at hippalus@yahoo.com.

Related Articles

Chesapeake’s $4-4.5 billion capex down 37% vs. last year

02/25/2015

Chesapeake Energy Corp., Oklahoma City, is budgeting total capital expenditures, including capitalized interest, of $4-4.5 billion for 2015.

New regulator lists UKCS ‘priority actions’

02/25/2015 The UK’s Oil and Gas Authority, responding to calls from industry and the government for prompt support of UK Continental Shelf (UKCS) exploration ...

Grizzly files OSCA application with AER for Thickwood

02/25/2015

Grizzly Oil Sands ULC, Calgary, has filed an Oil Sands Conservation Act application with Alberta Energy Regulator for the Thickwood project.

BLM moving toward strategy for Greater Sage Grouse, Jewell says

02/25/2015 Calling it a remarkable example of federal, state, and local cooperation, US Sec. of the Interior Sally Jewell said the US Bureau of Land Managemen...

Encana trims additional $700 million from 2015 capital budget

02/25/2015 Encana Corp. is reducing its previously reported capital investment for 2015 by $700 million to $2-2.2 billion “to maintain a solid balance sheet a...

Hickenlooper’s siting task force calls for more local consultation

02/25/2015 Colorado Gov. John W. Hickenlooper’s (D) oil and gas siting taskforce called for more consultation and greater involvement with local communities o...

MARKET WATCH: NYMEX crude oil prices holding above $49/bbl

02/25/2015 US light, sweet crude oil prices for April delivery settled slightly above $49/bbl on the New York market Feb. 24 while market participants awaited...

Santos-Inpex JV gains permits in Browse basin

02/25/2015 A joint venture of Santos Ltd. and Inpex Corp. has been awarded two exploration permits in the Browse basin offshore Western Australia, about 500 k...

Obama vetoes bill approving Keystone XL crude oil pipeline

02/25/2015 US President Barack Obama vetoed S. 1, authorizing construction of the proposed Keystone XL crude oil pipeline, saying that Congress had attempted ...
White Papers

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...

Accurate Thermo-Fluid Simulation in Real Time Environments

The crux of any task undertaken in System Level Thermo-Fluid Analysis is striking a balance between ti...

6 ways for Energy, Chemical and Oil and Gas Companies to Avert the Impending Workforce Crisis

As many as half of the skilled workers in energy, chemical and oil & gas industries are quickly he...
Sponsored by
Available Webcasts

On Demand

Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

register:WEBCAST


Oil & Gas Journal’s Forecast & Review/Worldwide Pipeline Construction 2015

Fri, Jan 30, 2015

The  Forecast & Review/Worldwide Pipeline Construction 2015 Webcast will address Oil & Gas Journal’s outlooks for the oil market and pipeline construction in a year of turbulence. Based on two annual special reports, the webcast will be presented by OGJ Editor Bob Tippee and OGJ Managing Editor-Technology Chris Smith.
The Forecast & Review portion of the webcast will identify forces underlying the collapse in crude oil prices and assess prospects for changes essential to recovery—all in the context of geopolitical pressures buffeting the market.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected