Lapindo?s financial burden surges: Report

The costs for handling the mud flow disasters in Sidoarjo, East Java, may potentially increase by four times to the present estimates, an Australian security company UBS AG said in its analysis.

UBS AG?s analysts Gordon Ramsay and Max Brewster had estimated that the costs may reach up to US$750 million, or more than four times to the present estimate of $180 million.

?Santos, which has 18 percent stake in gas field?s operations, will at least bear around A$126 million ($99 million),? the Bloomberg reported Friday quoting Ramsay and Brewster as saying in a report.

The gas well in Sidoarajo, East Java is operated by PT Energi Mega Persada's (EMP) subsidiary Lapindo Brantas Indonesia (LBI), which owns 50 percent stake. The other shareholders are Medco Energi International (38 percent) and Australia's Santos Ltd. (12 percent)

EMP?s investor relations officer Herwin Hidayat said their analysis was more speculative in nature.

Herwin insisted that total costs to deal with mud flow disaster at Banjar Panji-1 exploration well, as mentioned in the company?s press release date Oct. 18, would be $180 million. His is in accordance with the joint operation agreement.

At present, 3,400 families, which were affected by the mud flow disaster have been waiting for the compensation from Lapindo Brantas.

Meanwhile, The Jakarta Post reported on Saturday that Lapindo Brantas had decided to buy all land and buildings affected by the disaster.

The company made the decision after a four-hour closed-door meeting with 16 representatives of the affected residents, as well as the executive chairman of the national team in charge of dealing with disaster, Basuki Hadimulyono and Sidoarjo regent Win Hendarso.

The residents demanded Rp 1.5 per square meter for buildings and Rp 1 million for residential land. They requested Rp 120,000 per square meter of flooded rice fields.

Lapindo suggested payments of Rp 1,250,000 for buildings, RP 500,000 for land and Rp 90,000 for rice fields.

In Jakarta, Vice President Jusuf Kalla said Friday that Lapindo should write a letter expressing its readiness to carry out its agreement with the affected residents, but added that any financial compensation must be appraised to conform with market prices.

?It would be even better if Lapindo paid the victims 10 percent to 20 percent more than the normal price to give the victims a boost in starting new lives,? Kalla said. (*)