Major international banks finance catastrophic mud volcano

21 June 2007

Lapindo Brantas is shirking its responsibility for the damage

BRUSSELS (BELGIUM), JAKARTA (INDONESIA), 21 June 2007 - Major international banks such as Credit Suisse, Barclays, Fortis Group, Merrill Lynch & Co. and Natixis are injecting hundreds of millions of Euros into a set of companies responsible for a catastrophic mud volcano in Indonesia, Friends of the Earth International has revealed in two new reports launched today.

Toxic mud has been gushing from the ground in Sidoarjo, Indonesia since May 2006, following drilling operations by the company Lapindo Brantas Inc.


Click for a high resolution, print quality picture.
Submerged houses following mudflow at Sidoarjo. Credit: Arif Hidayat

Friends of the Earth International has demanded that the international banks withhold any further financing from Lapindo Brantas Inc until the company pays compensation for the damage from the disaster. Lapindo Brantas has so far failed to restore the damaged area or compensate the vast majority of the 3,500 families who have been forced from their homes.

Paul de Clerck, corporate campaigner of Friends of the Earth International, said: "Funding from international banks like Credit Suisse and Fortis enabled Lapindo to start their gas exploration. Now the banks must accept their role in the disastrous mudflow created by the drilling. Any new loan from the banks should be conditional on Lapindo paying compensation for all the damage it has caused in Sidoarjo."

Since May 29 2006, when the mud flow started, more than 15,000 people have been affected, 600 hectares of land including 11 villages have been submerged and farmland, road and rail tracks destroyed. At least 8 people have been killed in a large gas pipeline explosion related to the mud flow and the livelihoods of tens of thousands of people have been destroyed.

So far all efforts to stop the mud flow have failed and the catastrophic situation of the mudflow victims remains unresolved. The Indonesian government has ordered Lapindo to pay US$ 435 million in compensation to victims and for efforts to halt the mud. But Lapindo is shirking its responsibility for the enormous damage it has created. It denies causing the mud flow and argues that the compensation costs are too high. A year after the mud began to flow, Lapindo has only paid partial compensation to a small number of victims. The Indonesian company Energi Mega Persada, owning 50% of the Brantas Production Sharing Contract, has tried to dodge its liability several times by selling its assets to dubious overseas companies. Fortunately, these efforts were stopped by the Indonesian government.

Fara Sofa from Friends of the Earth Indonesia said:
"Lapindo Brantas tries to claim that the mudflow in Sidoarjo, Indonesia, is a natural disaster, but this is not true. Numerous experts have judged that the incident is a direct consequence of Lapindo Brantas' irresponsible actions."

As outlined in the reports by Friends of the Earth Europe/International, Credit Suisse, Barclays, Merrill Lynch, Natixis and Fortis [1] have provided loans of several hundreds of millions of Euros to Energi Mega Persada (Indonesia), PT Medco E&P Brantas (Indonesia) and Santos (Australia), the three companies owning Lapindo Brantas Inc. Without this financial support, Lapindo would not have been able to explore the gas field in Sidoarjo. Friends of the Earth, Banktrack and Berne Declaration have addressed the banks with their responsibility and urged them to take steps to guarantee that Lapindo pays all costs related to restoration and compensation [2].

Barclays, Merrill Lynch and Natixis did not respond at all. Credit Suisse, the bank that has provided the largest loans, said that they expect Lapindo to take its responsibility. But since May 2006 Credit Suisse has provided a new loan of US$ 126 million to Energi Mega Persada without inserting conditions to ensure that Lapindo actually pays for the damage they caused. Fortis has refused to take any responsibility or to take up the issue any further. [3]

 

THE REPORTS BELOW ARE EMBARGOED UNTIL 00:01 GMT, Thursday 21st June 2007
'Lapindo Brantas and the mud volcano Sidoarjo, Indonesia' can be found at:
http://www.foeeurope.org/publications/2007/LB_mud_volcano_Indonesia.pdf
'The financing of the three Brantas PSC companies' can be found at:
http://www.foeeurope.org/publications/2007/Brantas_financing.pdf

An integrated summary of the two reports can be found at:
http://www.foeeurope.org/publications/2007/exec_summ_banks_Indonesian_mud_flow.pdf

NOTES TO EDITORS:

[1] A total of at least 33 banks and financial institutions have provided loans and other financial services to Lapindo Brantas and Energi Mega Persada, Medco Energi and Santos, the three owners of Lapindo. Credit Suisse, Barclays, Merrill Lynch, Nataxis and Fortis were responsible for the most significant services.

[2] Letters sent to the banks:
Letter to Barclays:
http://www.foeeurope.org/corporates/pdf/Brantas_Letter_to_Banks_Barclays.pdf

Letter to Credit Suisse:
http://www.foeeurope.org/corporates/pdf/Brantas_Letter_to_Banks_Credit_Suisse.pdf

Reply from Credit Suisse:
http://www.foeeurope.org/corporates/pdf/Brantas_Letter_Credit_Suisse_Reply.pdf

Follow up to Credit Suisse:
http://www.foeeurope.org/corporates/pdf/Brantas_Letter_to_Banks_Credit_Suisse_follow_up_June8.pdf

Letter to Fortis:
http://www.foeeurope.org/corporates/pdf/Brantas_Letter_to_Banks_Fortis.pdf

Reply from Fortis:
http://www.foeeurope.org/corporates/pdf/Brantas_Letter_Fortis_Reply.pdf

Letter to Merrill Lynch:
http://www.foeeurope.org/corporates/pdf/Brantas_Letter_to_Banks_Merryl_Lynch.pdf

Letter to Natixis:
http://www.foeeurope.org/corporates/pdf/Brantas_Letter_to_Banks_Natixis.pdf

[3] See press statement following response from Fortis

 

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