[Kabar-indonesia] 1: Tempo Cover Story: Cleaning Up the Mudflow Mess [+Two Dynasties]
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JoyoNews at aol.com
Mon Jun 26 13:13:44 MDT 2006
5 Tempo Cover Story Reports (1 of 2):
- Cleaning Up the Mudflow Mess
- A Tale of Two Dynasties
- Delays Led to Lack of Safety
- Life at the Edge of a Mudflow
- Where to Dump the Mud?
Tempo Magazine
No. 43/VI
June 27 - July 03, 2006
Cover Story
Cleaning Up the Mess
The Bakrie family is being asked to bear the cost of all damages resulting
from the Sidoarjo mudflow. Medco and Santos could be asked to share the
responsibility.
WHAT has long been waited for has eventually happened. In Porong market,
Sidoarjo, East Java, Nirwan Bakrie, accompanying the entourage of Vice President
Jusuf Kalla, arrived to meet with the thousands of victims evacuated because of
the mudflow disaster. The appearance of the person who now controls the
Bakrie Group of businesses, on Tuesday last week created a great deal of attention.
He was directly bombarded with demands for compensation. This is because
Lapindo Brantas Inc., a subsidiary of the Bakrie Group, stands accused of being
responsible for the hot mudflows that have appeared during this month in the
subdistrict of Porong, Sidoarjo. The mudflows have covered the villages of
Jatirejo, Renokenongo, Siring and Kedungbendo. Previously productive paddy fields
that are also now covered in mud total about 127.29 hectares, while another 503
hectares are threatened. The mudflows have also flooded part of the
Gempol-Surabaya toll road to a height of 20 centimeters.
The volume of the mudflows has increased rapidly from an average of 5,000
cubic meters per day to 50,000 cubic meters. In total, the overall amount of the
mudflows has now reached 1.1 million cubic meters-the equivalent of 183,000
average size truckloads.
Jusuf Kalla has asked that the Bakrie Group bear responsibility for all
losses. "The Bakrie family must be seen to be standing up front," he said, pointing
towards Nirwan and directors of Lapindo. "As a national company, Lapindo must
be seen to set a good example." Nirwan, who was accompanied by Ari Saptari
Hudaya, the President Director of PT Bumi Resources (a subsidiary of the Bakrie
Group), and Imam P. Agustino, General Manager of Lapindo, nodded his head in
agreement.
It is certainly difficult to deny the involvement of the Bakrie family in
this case. In addition to Lapindo, the appointed drilling contractor, PT
Medici Citra Nusantara, is apparently also connected to the Bakrie family. This
contract was obtained by Medici in the name of Alton International Indonesia,
in January this year.
Alton Indonesia was founded by Medici and Alton International Singapore
(AIS)-a subsidiary of Federal International (2000) Ltd-in October 2004. Both
Syailendra Surmansyah Bakrie (a son of Indra Usmansyah Bakrie, a brother of
Coordinating Minister for People's Welfare Aburizal Bakrie) and Nancy Urania Rachman
Latief (the wife of Rennier Abdul Rachman Latief, a Commissioner of PT Energi
Mega Persada, Lapindo's holding company) are registered as shareholders of
Federal.
What was originally less than 7 percent shares held by Nancy and Syailendra
then increased to around 23 percent, following the purchase of 42 million
shares on January 9 this year. "I believe they were obtained in order to strengthen
our business in Indonesia," said Koh Kian Kiong, CEO of Federal, with a
beaming smile on his face.
Koh's dream came true. In less than two weeks, Alton Indonesia won a
drilling tender from Lapindo worth US$24 million. "This contractor was selected
because of someone close to Lapindo," said a Tempo source. In the end, Nancy and
Syailendra's shares totaled almost 25 percent, which amounts to a majority
share in Federal.
| | |
On the issue of compensation, according to Jusuf Kalla, Lapindo also has to
pay the wages of factory workers forced to close down by the catastrophe, the
repairs to damaged roads and schools, as well as ensuring that local residents'
homes are returned back to the condition they were in before the mudflows.
"Residents should not be losing a single cent," he said. Nirwan promised to meet
this demand. "In the name of the Bakrie family, I apologize," he said.
The following day, it was the turn of his elder brother, Aburizal Bakrie, who
requested that Lapindo bear responsibility. He asked that questions on the
details be directed to the Bakrie Group. "Don't ask me, I'm the Coordinating
Minister for People's Welfare," said Aburizal, who has not even once visited the
location of the disaster.
The disaster in Sidoarjo began when hot mud began spurting out of a paddy
field to a height of 8 meters on May 29 this year. Because the location of the
mudflows were located only between 150 meters and 500 meters from the Banjar
Panji-1 well, accusations were aimed at Lapindo. It was at this well that Lapindo
first commenced drilling for gas, at the beginning of March this year.
A letter dated June 5, 2006, from Medco E&P Brantas reinforced these charges.
The letter was from Budi Basuki, Medco's representative on the operational
committee, to Lapindo General Manager Imam P. Agustino. This letter, a copy of
which has been obtained by Tempo, states that during a technical meeting on May
18, 2006, this subsidiary of Medco Energi Internasional had reminded Lapindo
to install a casing.
A casing of 9 and 5/8 inches (around 25 centimeters) in diameter had to be
installed at a depth of 8,500 feet (2,590 meters). The function of this casing
was to prevent any potential leakage of moving mud and mudflow from kicking to
the surface, prior to drilling for limestone, as agreed to in the drilling
program.
However Lapindo, according to Medco-which has a working capital share
amounting to 32 percent in the Brantas Block-apparently did not carry this out. It
was for this reason that the well was incapable of holding back the pressure
that then occurred, resulting in the mudflows. Based on this, Medco feels that
Lapindo can be considered guilty of gross negligence, as stated in Article 1.28
of the Brantas Block joint operation agreement (JOA).
Based on Clause 4.6 of the Brantas JOA, Lapindo as the operator must be
responsible for claims coming from other parties, including guaranteeing that full
repair costs be made in order that everything be returned to normal, as it was
prior to the mudflow disaster.
Dody Mochtar, the spokesperson for Santos Ltd, confirmed this clause.
According to him, this clause means that no responsibility can be attached to
Santos, which owns 18 percent of the operational share capital. "We will abide by
the terms of the joint operation agreement," he said.
A similar statement was made by the Managing Director of the Medco Group,
Hilmi Panigoro. According to Hilmi, Medco's involvement in this block was only
limited to working capital participation, not as operator. Its authority was
also limited to only providing technical advice. "In the agreement it is quite
clear exactly what the responsibilities of the operator and the shareholders
are," he told Sofian from Tempo. As for compensation, Hilmi also said that there
would be no problems. "All operations are covered by insurance, including
claims," he said.
However, the matter is apparently not quite as simple. From the initial
stages, the insurance companies involved already said that not all claims arising
from damages and losses resulting from the drilling would necessarily be
acknowledged. "If it is proven that Lapindo must be held responsible, we will have
to see what is actually covered under the insurance policy," said Amir
Mochtar, Marketing Director of Tugu Pratama Indonesia.
Tugu Pratama, together with Jasa Asuransi Indonesia, Wahana Tata, Central
Asia and Astra Buana, are all part of a consortium that handles the assets
belonging to the regulatory upstream oil and gas body, BP Migas, including the oil
and gas field in Sidoarjo. For this, the office of Matthews Daniel-a company
that usually works out the size of losses in the energy and oil sector-is
currently calculating the effect of the mudflows in Sidoarjo. "They will also decide
what caused the damage," said Amir. In addition, this company will determine
what damages caused by the hot mudflows can be covered by the insurance
companies.
However, this opportunity appears to be slim indeed, because from
interviewing 32 witnesses, the police have concluded that PT Medici did not perform the
drilling in accordance with standard operational procedures. "We suspect a pipe
casing was not used," said Senior Police Commissioner Bambang Kuncoko,
spokesperson for the National Police. If this suspicion proves to be true, then this
negligence could even be classified as a criminal act.
If this is the case, then there is a likelihood that the Bakrie family alone
would have to bear full responsibility for the mudflow. In fact, according to
one source in the government, the cost of repairing the leaks resulting from
the drilling could reach anywhere between US$20 million and US$100 million.
This does not include the social costs incurred. Because of this, according to
one colleague of the Bakrie family, the total amount of the losses is predicted
to be as much as US$200 million (around Rp1.9 trillion).
However, this is limited to a statement that yet has to be proven. This is
due to the fact that all of the parties involved-Lapindo, Medco, Santos and the
insurance companies-still have all the relevant documents under lock and key.
According to a Tempo source, if one looks at the management agreement between
Pertamina and ExxonMobil on the Cepu Block, the final conclusion may be
different. This agreement states that each drilling operation must be approved by
all parties involved in the funding of the working capital.
It could be that one party did not approve, and this would mean it was free
of any responsibility. However, if oil and gas reserves were eventually
discovered, the previously-mentioned party would not share in the proceeds, based on
the condition relating to penalty costs-because they do not share in the
risk-taking clause in the initial drilling.
The question now remains whether or not Medco and Santos already gave their
approval. Medco's Corporate Secretary, Andy Karamoy, said that he was not able
to provide an answer yet. "Everything can be checked," he said. However,
according to the previous source, "If they gave their approval, Medco and Santos
will have to share the risk." Furthermore, if till now they have been receiving
reports from the operator and not voiced any objections, this would be the
same as allowing the potential damage to take place. "So don't start screaming at
the very end," he said.
In order to reduce the burden of the losses, there is still one opportunity
that could be utilized by Lapindo. This would involve passing off these costs
as recovery costs, also known as covering the costs of exploration. This must
be very carefully guarded, because eventually the state must pick up the bills.
Abdul Mutalib Masdar, an oil industry businessman, has stated repeatedly that
exploration costs cannot just be included in recovery costs, if this is
carried out in line with standard procedures.
According to a source who was involved in the drilling process, in August
2004 BP Migas did in fact remind Lapindo that special care had to be taken over
the drilling at Banjar Panji. "The design of the pipe casing had to be good,
otherwise there would be a likelihood for a major leak," said the source. It
would seem that Lapindo ignored this warning. -- Yandhrie Arvian, Metta
Dharmasaputra, Rohman Taufiq
and Adi Mawardi (Sidoarjo)
-----------------------------------------------
Tempo Magazine
No. 43/VI
June 27 - July 03, 2006
Cover Story
A Tale of Two Dynasties
WHETHER it likes it or not, there is no way the Bakrie family is going to
avoid bearing the burden of the losses and damages caused by the hot mudflow
disaster in Porong, Sidoarjo, East Java. Thousands of cubic feet of mud now cover
a total of four villages and have rendered countless hectares of paddy fields
unproductive. In addition, several factories had to be closed down and
thousands of local residents had to be evacuated, all because of errors in
exploration drilling by Lapindo Brantas Inc.
The drilling contractor is Alton International Indonesia. This company was
founded in October 2004 and is owned (30 percent) by Alton International
Singapore-a subsidiary of Federal International Ltd., which is headquartered in
Singapore. A press release issued by Federal on January 20 this year stated that PT
Medici Citra Nusantara is also one of the owners of this joint venture
company.
Under further investigation, both Lapindo and Alton are connected to the
Bakrie family. In Lapindo, the Bakrie Group's flag is flown through PT Energi Mega
Persada, which will soon merge with PT Bumi Resources, another subsidiary of
the Bakrie Group. In Alton, the footprints of the Bakrie family can be traced
through the ownership of shares in Federal International under the name of
Syailendra Surmansyah Bakrie (12.29 percent), who is none other than a child of
Indra Usmansyah Bakrie, a younger brother of the Coordinating Minister for
People's Welfare, Aburizal Bakrie.
Interestingly, it is not only the Bakrie family which is connected to the
drilling contractor as well as the operating company of this oil and gas field in
Sidoarjo. Also appearing in these two companies are the names of Mr. and Mrs.
Rachman Latief. In Energi Mega, Rennier Abdul Rachman Latief is registered as
the owner of 3.11 percent of the shares, and also as a commissioner as well
as the President Director of Lapindo. At the same time, his wife Nancy Urania
Rachman Latief is the owner of a 12.33 share in Federal.
Based on this share composition, clearly both the Bakrie and Rachman Latief
families will be hit by the "common threat" in this case. It is also likely
that PT Medco E&P Brantas (a subsidiary of PT Medco Energi Internasional, owned
by the Panigoro family) and Santos Ltd (Australia) will also have to take
responsibility for the losses involved. This is because both companies contributed
financing capital for this drilling project (respectively 32 percent and 18
percent), while the remaining participating interest (50 percent) was
contributed by Lapindo itself.
------------------------------------------------
Tempo Magazine
No. 43/VI
June 27 - July 03, 2006
Cover Story
Delays Led to Lack of Safety
THERE has been much criticism over the handling of the mudflows in Sidoarjo.
Ever since this disaster began on May 29 this year, government measures have
not been sufficiently rapid. Proof of this is shown by that fact that even
though President Yudhoyono already instructed that this case be handled
immediately, it has never been clear who is ultimately responsible. As a result, the
disaster worsened.
Just last week, Vice President Jusuf Kalla indicated that the Bakrie Group
had to bear responsibility for the losses incurred. Coordinating Minister for
People's Welfare, Aburizal Bakrie-who never once even looked at
Sidoarjo-eventually declared that PT Lapindo Brantas had to bear the responsibility. However,
as far as the details were concerned, Aburizal requested that related
questions involving the case be directed to Nirwan Bakrie, his younger brother who now
handles many of the Bakrie family businesses.
May 29
Hot mudflow gushers begin appearing in the vicinity of a gas drilling region
belonging to PT Lapindo Brantas, located around Sidoarjo. Lapindo's management
says that this was the result of the recent earthquake in Yogyakarta and
Central Java.
June 5
PT Medco E&P Brantas, the drilling partner, send a letter to Lapindo. On May
18, Medco had already reminded Lapindo that a casing needed to be installed at
a depth of 8,500 feet to prevent potential leaks.
June 12
During an open hearing, Commission E at the East Java Regional House of
Representatives (DPRD) requests that Lapindo take responsibility for damage to the
environment as well as losses suffered by members of the general public. A
similar request is made by State Minister for the Environment, Rachmat Witoelar.
However, Lapindo General Manager Imam Agustino says that this responsibility
must be borne also by the government.
June 14
President Yudhoyono asks the Department of Energy & Mineral Resources,
together with the regulatory upstream Oil & Gas Body (BP Migas), to begin an
investigation.
June 15
Sutedjo Yuwono, Secretary to the Coordinating Minister for People's Welfare,
states that the department led by Aburizal Bakrie does not need to visit
Sidoarjo yet, because it is felt that it had already been represented by both the
State Minister for the Environment and the Minster of Energy & Mineral
Resources. Agung Laksono, Speaker of the House of Representatives (DPR), says he
considers that government measures have not been quick enough.
June 16
Lapindo General Manager Imam Agustino denies that the mudflows are the result
of errors by the drilling team. The State Minister for the Environment says
that no sanctions would be imposed against Lapindo until the investigation team
had made its report.
June 19
Speaking in Surabaya, East Java, Minister for Energy & Mineral Resources,
Purnomo Yusgiantoro, states that the hot mudflows were not caused by the
earthquake but by drilling mistakes.
June 20
Speaking in Sidoarjo, Vice President Jusuf Kalla requests that Lapindo bear
responsibility for all the losses suffered by residents. Present on this
occasion are two representatives of the Bakrie Group: Nirwan Bakrie and Ari Sapta
Hudaya. Nirwan apologizes on behalf of the Bakrie family and says they were
prepared to provide compensation. Lapindo's spokesperson Yuniwati Teriyana
maintains that the company had carried out all of its drilling in full accordance
with standard operating procedures.
June 21
Coordinating Minister for People's Welfare Aburizal Bakrie declares that
Lapindo must bear responsibility over the disaster. Minister of Agriculture Anton
Apriyantono requests that Lapindo provide compensation for agricultural land
that has been damaged.
June 22
According to a statement made by the Indonesian Police, Lapindo's partner, PT
Medici Citra Nusantara, did not follow drilling standard operating
procedures. Negligence with regards to installing a pipe casing could be considered a
criminal offense.
Alton International Indonesia
Alton International Indonesia was founded in October 2004. On January 20,
2006, this company pocketed the oil and gas drilling contract project from
Lapindo Brantas Inc. in Sidoarjo, East Java. The contract from this subsidiary of PT
Energi Mega Persada Tbk was worth some US$24 million and was valid for a
period of one year from mid-February 2006. Around 30 percent of the shares were
owned by Alton International Singapore-a subsidiary company of Federal
International (2000) Ltd. (Singapore)-and the remainder by PT Medici Citra Nusantara.
Lapindo Brantas Inc.
Lapindo Brantas Incorporated was founded in 1996. After falling into the
hands of PT Energi Mega Persada in March 2004, the company was owned by Kalila
Energy Ltd. (84.24 percent) and Pan Asia Enterprise (15.76 percent). Lapindo
became the operator and owner of 50 percent in the Brantas Block, which amounted
to some 3,050 square kilometers. The operating area covered both on-land mining
rights in East Java and offshore mining rights in the Madura Strait between
the Wunut and Carat gas fields in Sidoarjo. Production capacity of gas in 2005
at this block amounted to 59 million cubic feet per day.
PT Energi Mega Persada
PT Energi Mega Persada is a subsidiary of the Bakrie Group, through PT Kondur
Indonesia and PT Brantas Indonesia. Its core business are the mining and
trading of oil and gas, not only in the Malacca Strait, Sumatra, but also the
Brantas Block, East Java. In 2004, this company succeeded in fully acquiring the
mining working region in Kangean Block, East Java. In the near future, Energi
Mega will merge with PT Bumi Resources Tbk, another subsidiary of the Bakrie
Group.
-- Metta Dharmasaputra, Yandhrie Arvian, Y. Tomi Aryanto
-----------------------------------
Tempo Magazine
No. 43/VI
June 27 - July 03, 2006
Cover Story
Life at the Edge of a Mudflow
Below Porong, Sidoarjo, the fast-flowing mud
keeps discharging over four nearby villages.
THE quest neared a climax. For two days the machine roared while dredging the
mud. Finally, the red tap that it had been looking for came into sight. With
a half a diameter in size, it was large enough. However, because it was
submerged under 3 meters of mud, it was hard to find.
Dozens of black-uniformed people immediately cleaned the tap. They removed
the mud meticulously. "Now all we need to do is install the snubbing unit in
this well," one of them said. The snubbing unit or mobile drilling equipment was
carried by eight trailer trucks. "It detects and blocks the source of the
crack that is leaking the mud," said Imam Agustino, General Manager of PT Lapindo.
The next quest is the source of the mudflow. This is one of the most
difficult tasks. It has been a month since the mud erupted in Porong district, yet the
flow continues to spread. According to Lapindo's calculations, about 5,000
square meters of mud is being discharged every day.
According to Imam, once the center is located, then materials to block the
crack will be injected. He figures the injection will be completed at the
earliest in mid-July. However, this estimate is too ambitious because until the end
of last week the team of experts had not found the source of the leak. This is
the crux of the matter.
The longer the disaster is allowed to continue, the wider and higher the
areas the mud will cover. A team of experts from the Technology Institute of
Surabaya (ITS) has a different interpretation about the volume of the mud that
inundated four villages in Sidoarjo. Accordingly, the daily volume reaches some
50,000 square meters, 10 times Lapindo's estimate. Up until last week, an
estimated 1.1 million square meters of mud has been spewed out.
The discovery was found after looking down from mounds of mud in 16
locations. Near the source, the depth reaches 6 meters. Laterally, it drops to 3
meters, and at the outermost it is 1.5 meters. "The team members were shocked
because the initial estimate was not that high," said Makky Sandra Jaya, secretary
to the team established by the executive board of the oil and gas regulatory
body, BP Migas, and Lapindo.
Where did the never-ending mudflow come from? Based on research by the ITS
team of geology experts, there were two faults under the toll road and in
Renokenongo village. The faults were at a depth of 6,000 meters, deeper than the
Lapindo well which was only 3,000 meters deep.
According to Seno Puji Sarjono, a member of the team, the hot mud surfaced
out of a fault. The team is studying whether the fault is connected to the
drilling. "Also, whether the fault is connected to a drill hole," he said.
To identify the location of the fault, the team is using an Australian-made
machine that emits radio waves. The team has detected a possibility of other
faults such as in Jatirejo village and Porong Road. The results of the study
will determine the snubbing unit installation. "We should not close one source
only to discover another fault emerging," said Seno.
The fault was also disclosed by Rovicky Dwi Putrohari, an Indonesian
geologist currently working in Malaysia. According to him, the fault in the Porong
area stretches from the northeast to the southwest. Rovicky quoted research by
Arse Kusumastuti who discovered a collapsed area.
This geologist who devotes his time to studying earthquakes and the outer
crust of the earth, explains that, in drilling, the point of the drill head
reaches the clay layer. The layer then becomes unstable because it becomes mixed
with underground water, turning it mushy.
Because of the fault, Rovicky estimates that there are three possibilities
for the leak. First, seepage can come out of the edge of an old hole that
Lapindo has put into an encased pipe. Second, from a hole that has not been encased,
causing mud to leak out of a fault cut by the well hole. Third, the source is
not related at all to the Banjar Panji-1 well.
Once the source of the leak is known, there are two options to block it.
First, inject mud and cement into the Banjar Panji-1 well. Second, make a new well
beside the old one, and from the side inject mud and cement to the leak
center. We hope the source can soon be blocked before mud eventually covers
Sidoarjo.
-- Untung Widyanto, Rohman Taufiq, Adi Mawardi, Sunudyantoro, Ahmad Fikri
--------------------------------------------
Tempo Magazine
No. 43/VI
June 27 - July 03, 2006
Cover Story
Where to Dump the Mud?
FOR days, the villagers at Kedungbendo worked together to build a dam to ward
off the mud. They did not want their village to suffer the same fate as three
other villages around Lapindo-Siring, Jatirejo, and Renokenongo-today covered
in the mudflow from PT Lapindo Brantas' well. Alas, last week the dam
collapsed anyway.
It has been nearly a month since the major leak at Lapindo, but the flowing
mud has yet to be stopped, let alone removed. Lapindo has actually prepared
three pools for the mud. One is to the north of the Porong-Gempol toll road, or
only 200 meters from the well. And the two others are to the south of the toll
road. "They can accommodate mud for up to three weeks," said Imam Agustino,
General Manager of PT Lapindo Brantas.
Imam's calculations turned out to be wrong. The mud spread to Kedungbendo,
located near the first pool. It was only afterwards that local officials
realized that the volume of the mud spurting out of the Lapindo field was much higher
than the original estimates of 5,000 square meters per day. The Environmental
Impact Management Agency of the East Java provincial government estimates
that the volume is 50,000 square meters per day.
This estimate is the same as that of the Technology Institute of Surabaya
(ITS), which studied 16 points in the mud-covered region. "The figure is the most
extreme," said Anggraeni, a member of the ITS team.
To prevent the mud from spreading further, ITS suggested that the pool area
be extended from 24 hectares to 225 hectares. "The location covers Porong,
Tanggulangin and Jabon districts," said Hasan Basri.
Today, the Sidoarjo regency administration has only made available 85
hectares, of which 24 hectares is in Renokenongo village. Once all pools are ready,
they are expected to accommodate the mud for two months. Once the mud has
settled in the pools, the water on the surface will be channeled to the Porong
River.
This theory will work if the pools are close to each other. The problem is,
the first pool is far from the second and third pools. Right now, the last two
pools are still empty; there is no mud at all.
Initially, Lapindo had hoped that the mud would automatically flow to the
pools, following the pull of gravity. Alas, it did not. Instead, it hit dozens of
factories and houses belonging to the Jatirejo and Renokenongo residents.
Lapindo tried to direct the mud to the second and third pools, using a
suction machine. "However, it only worked for a while before it broke down," said
Subakri, Secretary of Renokenongo village. As a result, it flows in every
direction.
-- ZA, Sunudyantoro and Rohman Taufiq (Surabaya)
-End 1 of 2-
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Joyo Indonesia News Service
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