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Santos says has provisions for clean-up bill

Santos Ltd has rejected suggestions that it is facing a ten-fold cost blow-out in its clean-up of the world’s largest mud volcano in East Java.

The oil and gas giant dismissed media speculation that it has understated the severtity of the incident, saying “given the conditions at site and current activities being conducted…existing provisions remain an appropriate estimate of its potential liability associated with the incident.”

Santos was responding to a study, leaked to Fairfax newspapers, which said the only way to mitigate the disaster, resulting from a drilling incident in May 2006, was to transport the mud 14 kilometres to the ocean to create a wetland, estimated to cost between $1.9 billion and $4.6 billion over 25 years.

The local company’s share of the bill would come to between $355 and $829 million, the report said.

Santos said “the situation remains dynamic, complex and uncertain, and the company will continue to review the adequacy of the provision in light of developments and available information.”

Santos owns an 18 per cent non-operating stake in PT Lapindo Brantas, which reported drilling problems a day before the eruption.

Santos has yet to admit liability and has been accused of downplaying the disaster, which has been said is likely to cost the company 10 times more than it has revealed to the stock market.

Tim Lindsay, director of the Asian Law Centre at Melbourne University, said most of the public does not understand the magnitude of the problem.

“If the projections are correct, it will be catastrophic for any company held responsible,” Professor Lindsay told Fairfax.

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