Jakarta – In another twist to the Sidoarjo mud volcano disaster, PT Energi Mega Persada (EMP) says it has sold PT Lapindo Brantas Inc., its unit that operates the gas well that caused the massive mud eruption in East Java, to an unaffiliated company.
EMP, an affiliate of a company controlled by the family of Coordinating Minister for People's Welfare Aburizal Bakrie, signed an agreement on Nov. 14 to sell its shares in Kalila Energi Ltd. and Pan Asia Enterprises Ltd. to Freehold Group Ltd., an independent third-party incorporated in the British Virgin Islands, the company said in a statement sent Wednesday to the Jakarta Stock Exchange.
Kalila and Pan Asia, both based in Hong Kong, jointly own Lapindo.
EMP did not provide any financial details regarding the sale, nor details about Freehold Group's approach to accepting responsibility from the former shareholders for the costs of coping with the mud disaster.
The company only said that Lapindo Brantas would be supported by Minarak Labuan Co. Ltd., another affiliate of the Bakrie Group, in tackling the mudflow. Company executives were not available for comment.
Lapindo Brantas owns half of the Sidoarjo gas well, while PT Medco Energi Internasional and Australia's Santos Ltd. own 32 percent and 18 percent respectively.
Santos said recently that Lapindo had told them that the cost of containing and eventually stopping the mud could increase by up to 80 percent over earlier estimates to US$180 million.
The announcement came after the Capital Markets Supervisory Agency (Bapepam) refused to approve EMP's plan to sell Lapindo to Lyte Limited, a unit of the Bakrie Group.
Bapepam had sought clarification regarding the consent of EMP's minority shareholders for the plan.
The agreement to sell Lapindo to Freehold, however, "requires no approval from shareholders," EMP said in the statement, as it "neither involves any conflict of interest nor is it material." The company also said it believed the sale was in the best interests of the minority shareholders.
EMP, Indonesia's second largest publicly-listed oil and gas firm, had three times postponed a shareholders' meeting to seek approval for the sale of Lapindo to Lyte.
The announcement came a day after EMP and PT Bumi Resources, another company controlled by the Bakrie Group, canceled a planned merger due to the delay in the sale of Lapindo.
EMP gave assurances that the sale agreement with Freehold would take into account the needs of the people of Sidoarjo, with Lapindo receiving support from Minarak Labuan Co., another Bakrie Group affiliate, for its efforts to deal with the disaster.
In a separate statement, EMP said Lapindo was ready to face a lawsuit filed by Medco, and had appointed Houston-based law firm Baket Botts to represent it.
In its action, Medco argues that Lapindo violated their May 1992 joint operation agreement for the Sidoarjo gas well. Medco is also demanding that it be exempted from any obligation to compensate the victims of the disaster.