VZCZCXRO0044
PP RUEHCHI RUEHDT RUEHHM
DE RUEHJA #3448 3420920
ZNR UUUUU ZZH
P 080920Z DEC 06
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC PRIORITY 2410
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHBY/AMEMBASSY CANBERRA 0197
RUEHWL/AMEMBASSY WELLINGTON 1198
RHHMUNA/HQ USPACOM HONOLULU HI
RUEHGP/AMEMBASSY SINGAPORE 5624
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
ZEN/AMCONSUL SURABAYA

UNCLAS JAKARTA 013448 
 
SIPDIS 
 
DEPT FOR EAP/MTS AND EB/ESC/IEC 
DEPT PASS OPIC, EXIM, TDA 
DOE FOR CUTLER/PI-32 AND NAKANO/PI-42 
COMMERCE FOR USDOC 4430 
 
FROM AMCONSUL SURABAYA #2689 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: ECON EINV EPET PGOV ID
SUBJECT: East Java Mudflow: Lapindo Defaults, 
Contractors Walking Out 
 
Ref. A: Jakarta 13358 
Ref. B: Jakarta 12733 notal 
 
¶1. (SBU) ConGen Pol/econoff and Jakarta USAID officers 
visited the PT. Lapindo Brantas (Lapindo) mud volcano 
site and the relief well operation in Porong, East Java 
(Ref. A) on December 8, meeting with several 
representatives of contractors working on the relief 
well.  According to the contractors, Lapindo has 
stopped paying everyone supplying and running its 
relief well operation.  The relief well is the last and 
only hope of quickly killing the fractured gas well 
(Ref. B) that is spewing over 200,000 cubic meters per 
day of hot mud.  (Note: The mud volcano is 
approximately 12 miles south of ConGen Surabaya. End 
Note.)  Lapindo is now USD 10 million in arrears to the 
drilling rig owner and operators of the well.  As a 
result, the operators shut down the drilling rig at a 
safe point and presented demand letters for payment in 
full by December 8 or they would all simultaneously and 
permanently walk off the job.  There are several 
American contracting firms working at the relief well, 
including Haliburton and Boots and Coots.  At close of 
business on December 8, none of the contractors had 
been paid and Haliburton left East Java once again. 
 
¶2. (SBU) Contractors had previously stopped work in 
October over non-payment issues but returned after 
Purnomo Yusgiantoro, Minister for Energy and Mineral 
Resources, guaranteed payment and established a USD 4 
million deposit as advance payment.  The deposit is now 
spent and Lapindo is not offering any signs that it 
will meet the contractor's demands, claiming they have 
run out of funds.  Initially, the new Lapindo Chief 
Financial Officer promised payment of all arrears by 
the deadline, but later returned to the contractors 
asking for extensions and payment plans.  The 
contractors stated that Minister Purnomo and the head 
of the National Mud Disaster Team (Timnas), Basuki 
Hadimulyono, were both aware of the lack of payment and 
status of the relief well. 
 
¶3. (SBU) Despite the recent press reports claiming 
imminent failure of the relief well, the well operators 
remain confident that the relief well project will be 
successful with the caveat that they will need a second 
well to create sufficient hydrostatic pressure to stop 
the flow of water.  They claim that with USD 100 
million and control of the drilling operation, they can 
kill the well by March or April 2007.  They remain 
highly frustrated with the lack of payment for both the 
primary contractors and their suppliers as well as 
Lapindo and Timnas's insistence on having final 
decision making authority. One contractor summed it up, 
"I understand their wanting to be the heroes here. 
But, they have no clue what they are doing and they are 
making it impossible for us to do our jobs and kill 
this off before more people are hurt and homes are 
destroyed." 
 
PASCOE