Santos updates Lapindo mudflow

The following is an excerpt from Australia’s oil and gas firm Santos report for the quarter ended March 31, 2007 on Lapindo mudflow incident in Brantas PSC, East Java, in which Santos has a 18 percent participating interest:

 

On 29 May 2006, mud and water commenced flowing to the surface from a series of vents approximately 200 meters from the Banjar Panji-1 exploration well. The mud continues to flow at a rate of approximately 100,000 to 150,000 cubic metres per day, and has affected a total area of about 450 hectares.

 

In its Financial Report for the year ended 31 December 2006, released to the market on 22 February 2007, Santos recorded a provision of A$88.5 million which incorporates the Board’s prudent estimate of the costs that may arise relating to the incident.

 

This provision reflects an assumption that a resolution will ultimately be agreed between the Government, Lapindo Brantas Inc, the non-operating PSC partners (Santos Brantas Pty Ltd and PT Medco E&P Brantas) and all other relevant parties as to the costs related to long-term mud management options, proposed costs of infrastructure relocation and any third party claims.

 

Offsetting this provision, Santos recognized an amount of A$21.8 million as insurance proceeds, leading to a net provision of A$66.7 million.

 

This insurance amount reflects recoveries under policies held by the joint venture, together with a progress claim under the Company’s own well control insurance policy.

 

Further announcements in relation to Santos’ share of potential costs relating to the Banjar Panji-1 incident will be made as definitive information becomes available and has been evaluated.

 

Lapindo Brantas is the operator and holds a 50 percent participating interest in the Brantas PSC. (end of excerpt)