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Gas exploration disaster hits Indonesia -

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Gas exploration disaster hits Indonesia

Reporter: Geoff Thompson

MAXINE MCKEW: Poisonous mud and gas erupting from kilometres below the earth, 8,000 people
displaced and hundreds hospitalised: it all sounds like another of Indonesia's frequent natural
disasters, but not this time. The latest calamity on the island of Java has been caused by a gas
exploration project that has gone horribly wrong, and for the past six weeks, has unleashed
hundreds of tonnes of hot toxic mud. Indonesia's police are threatening to charge some of the drill
operators with criminal negligence. And caught up in it all are two Australian companies. Oil and
gas giant Santos is a minority shareholder in the venture, while the expertise of another
Australian company - Century Resources - has been called in to try and halt the blow out. Indonesia
Correspondent Geoff Thompson filed this report from the affected area near Surabaya in East Java.

MAN #1: A disaster like this has never occurred before.

MAN #2: This is very deep and we don't know yet until today what's happened in Sidoarjo.

MAN #3: This is a disaster for the people.

GEOFF THOMPSON, INDONESIA CORRESPONDENT: Perched atop the Pacific Rim of fire, Indonesia is
certainly no stranger to natural catastrophes, and when hot toxic mud first burst from the ground
near a gas exploration well in east Java, people were quick to blame the earthquake in Yogyakarta,
270 kilometres away. But this misfortune is of man's making. Six weeks ago, a drilling rig on this
site reached three kilometres underground and encountered a problem. Attempts were made to shut the
well, but then the earth opened up. First, a major crack appeared here and now they've appeared all
around, spewing at least 500 cubic metres of toxic mud every day. An area of 12 square kilometres
has now been covered and four entire villages have been affected, displacing almost 8,000 people.

IMAM KHOLILI (Translation): When smeltered, I had trouble breathing and a sore throat and felt like
I wanted to be sick.

GEOFF THOMPSON: There's been no World Cup fun for the residents of Sidoarjo. Their houses are
chest-deep in mud, along with their rice paddies and the factories where they work. Thousands of
the internally displaced now live at this new concrete market complex, turned refugee camp. Each
person surviving on handouts of $11 a week. Imam Kholili has lost both his family's home, and his
livelihood. He took us back to where life as he knew it hit the end of the road. His street is now
under more than 1m of mud and he says the inside of his home is even worse.

IMAM KHOLILI (Translation): It came from that direction, the one who saw it coming first was my
wife, because she was selling stuff out here. The men were actually working out here fixing the
dam, but the dam was not strong enough, so my wife started rescuing our children and our belongings
to take them to the camp when the mud came, flowing like hot water.

GEOFF THOMPSON: Stopping the mud flows could take months, despite attempts to do so with a snubbing
unit brought in by the project's coordinator and majority shareholder, Lapindo Brantas. Amir Hamzah
represents the Indonesian Government's gas and oil regulator responsible for the project.

AMIR HAMZAH, BP MIGAS: But the competition is not finished yet, of course. We are awaiting the team
to calculate any possible... any possible compensation that we have to do it.

GEOFF THOMPSON: The final compensation bill is expected to run into the hundreds of millions of
dollars. Not exactly welcome news to one of the project's minority partners: the Australian gas and
oil giant, Santos, which has released a statement saying that it has appropriate insurance cover
for such occurrences. Santos, which has an 18 per cent stake in the venture, does not want to
comment further. Other than to say that: "Santos is deeply concerned by [the] incident,
particularly its impact on the local community and the environment. Santos is monitoring the
response efforts closely, with an immediate priority of supporting measures by the Operator of the
well to assist those affected and to minimise the environmental impact." The project's other
partner is PTMedco with a 32 per cent stake. And while it won't comment publicly, a leaked letter
to Lapindo Brantas makes it clear where it stands. "We consider Lapindo Brantas," the letter reads,
"has committed a gross negligence [for not] anticipating potential hole problems [and setting the
right drill-casing] as agreed in the drilling program", it says. Santos declined an opportunity to
comment on the letter, but a representative of the Bakrie family group, which owns Lapindo Brantas,
says all the project's partners agreed to the drilling program.

S. ZUDHI PANE, PT BUMI RESOURCES TBK.: Of course, even from the very beginning when we propose,
Lapindo Brantas proposed to drill this, the drilling proposal as well as the agreed drilling
procedure and program agreed by all the parties, including Santos.

AMIR HAMZAH: I don't know yet, I don't know yet, so this is very difficult because they have their
own business. We don't know what's happened between Santos and also Lapindo Brantas as well. We'll
be waiting on it.

GEOFF THOMPSON: The drilling contractor hired by Lapindo is currently the focus of a police
investigation. 50 people have been interviewed and six may face charges punishable by up to 12
years in jail.

M. AMHAR AZETH, CHIEF OF DETECTIVES, EAST JAVA: We started from the man in the field - what you
said just now - the little people, because he is the doer, you know. He was done something.

GEOFF THOMPSON: So you're starting from the bottom and working your way up?

AMHAR AZETH: That's right. This is, you know, the Indonesian, you know, procedure of setting up the

GEOFF THOMPSON: Indonesian procedure also allowed Lapindo's drilling contract to go to a company
also under the influence of the powerful Bakrie family, of which Indonesia's ambitious chief
welfare minister, Aburizal Bakrie, is the leading light.

ZUDHI PANE: I'm quite sure that Lapindo already do everything in accordance with the normal
procedure; at least, in this country.

GEOFF THOMPSON: The normal procedures, but that still means that family-linked companies can get
the contract?

ZUDHI PANE: Mm, I'd rather not comment on that. (Laughs)

GEOFF THOMPSON: Environmentalists say the searing mud is a toxic brew of harmful chemicals churned
up with dangerous gases.

TORRY KUSWARDONO, INDONESIAN ENVIRONMENT FORUM: There are two things: first, it's the mud and
second, it's the gas, the hydrogen sulphide. It can cause severe infection to the respiratory

GEOFF THOMPSON: Hundreds of people, particularly the young and old, have been hospitalised,
complaining of nausea, diahorrea and breathing problems. Others just get burnt.

ACHMAD BASYORI (Translation): Bad, the skin is peeled off on both legs. It's been one week and
they're still feeling hot.

GEOFF THOMPSON: The Sidoarjo incident is a toxic cocktail of political power, corporate negligence
and environmental disaster, which has the nation's activists looking for someone on whom the mud
might stick.

like this, such magnitude, you know, the backyard of all these people, so many affected by this,
and sort of a blatant disregard by the very senior officials of the government.

TORRY KUSHWARDONO: I think everybody who were involved to invest in Lapindo in Brantas plot has to
be embarrassed because of these accidents. Because they invest in a very irresponsible project.

GEOFF THOMPSON: No imminent solution is in sight, but another Australian company - Century
Resources - is on its way, hoping that its 1,500 tonne drilling rig might relieve some of the
pressure; underground, at least.