EMP scraps plan to sell Lapindo

JSX listed oil and gas company PT Energi Mega Persada (EMP) scrapped for a second time plans to sell its stake in the East Java exploration well that has been spewing mudflow for months.

EMP operates the Banjar Panji-1 well through Lapindo Brantas Inc., which is wholly owned by EMP's subsidiaries Kalila Energi Ltd. (KEL) and Pan Asia Enterprise Ltd. (PAN). EMP signed an agreement on Nov. 14 to sell KEL and PAN to Freehold Group Ltd.

It was the second effort by EMP to sell Lapindo after the previous deal in which it sold the troubled unit to Lyte Ltd, a company affiliated to Bakrie Group, was dropped due to protests from various parties. EMP is linked to Bakrie Group.

EMP president Christopher Newton said on Tuesday Freehold had asked for the cancellation of the transaction.

Freehold wants to scrap the agreement because of ``the controversy related to the divestment transaction,'' Newton said in a statement on the company's website.

The capital market supervisory agency (Bapepam) earlier rejected EMP's move to sell Lapindo to Freehold, saying is not "appropriate".

The mudflow has caused damage on houses and infrastructure in the surrounding areas and displaced more than 10,000 people.

Costs to manage and stop the mudflow are expected to increase after a gas pipeline owned by stated oil and gas firm Pertamina that runs under a dam built to contain the sludge exploded, killing 11 people and cutting supply to industries and power plant in the province.

Despite the cancellation of the transaction with Freehold, EMP assures that LBI will do all necessary efforts to resolve the mudflow and impacts, Newton added. (denny)