Release: Lapindo steps up efforts to construct mud settlement facility

Surabaya, June 13, 2006 - Lapindo Brantas Inc. tries as hard as possible to accelerate the construction of a settling pond to prevent the mud from inundating a wider area as well as to settle the overflow of natural mud that occurs every day in Porong District, Sidoarjo Regency.

The settling pond is being constructed in Jatirejo village. The 12 hectare-settling pond will have a capacity of accommodating 120,000 m3. When the settling pond is in place, the mud will be moved to the pond and in this way, a plan for the settlement of the source of mud can be prepared soon. Otherwise, it is impossible to resolve the problem because the mud surface continues to thicken.

In response to a statement that there is a wrong procedure in regard to the drilling activities, especially related to the determination on the depth of installed pipe with 9-5/8 inches in width, Lapindo explains:

1. Under the approved drilling program, the 9-5/8 inch pipe will be installed at a depth of 15-20 feet in the formation of Kujung, where the Kujung formation is expected to be in a depth of 8,500 feet. The design has been prepared based on a drilling experience at the nearest well, namely Porong - 1 well, where casing installed in a depth of 50 feet above Kujung formation, has resulted in a loss and kick problem that is difficult to solve. Since the well is an exploration well, where the exact depth of formation (stone layer) cannot be predicted, the determination on the depth is made based on an actual pressure of formation and the condition of the hole at that time.

2. A 12-1/4 inch-hole had been drilled until a depth of 8,500 feet, where Kujung formation had not been found as predicted. The drilling activities continued until at a dept of 8,750 feet but Kujung formation was not found.

3. To predict a depth of Kujung formation, a survey (check shot) had been conducted at a depth of 8,750 feet, however, there was unclear result. Based on a seismic interpretation, Kujung formation is estimated at a depth of 8,800 feet or 9,400 feet or most probably, it is at a depth of 9,600 feet.

4. The drilling continued, however, at a depth of 8,800 feet and until at a depth of 9,200 feet, Kujung formation was not found.

5. After considering the hole, a decision was made to continue drilling until penetrating Kujung formation based on the plan. And by taking "kick tolerance" into account, the maximum drilling could only be conducted until a depth of 9,400 feet. However, at a depth of 9,297 feet, a loss then occurred.

6. To handle the loss, efforts had been made to pump clogging up materials and the well was in a static condition, the loss did not occur anymore. A plan now is underway to install a cover pipe into which cement will be pumped.

To evaluate the cause of the incident and source of the mud overflow, the Oil and Gas Upstream Regulator (BPMIGAS) has appointed an independent consultant and besides, Lapindo has invited foreign experts, including Alert Disaster Control and Abel Well Control.(end of release)