The mystery of Lusi

The struggle to discover the cause of the eruption of a mud volcano has vital importance for the loc

Volcanoes are usually stately and sometimes violent. Great mountains with smooth slopes and circular calderas, they lie dormant for centuries, or give off occasional wisps of steam and, more rarely, surges of lava and clouds of ash. And every now and then, one of them explodes spectacularly.

But the volcano that erupted at 5am on 29 May 2006 in Porong, Indonesia, was different; no mountain, just a spreading lake of simmering mud and a 30m plume of sulphurous steam. Up to 50,000 people lost their homes, more than a dozen villages were submerged and two dozen factories abandoned. Rice paddies and shrimp ponds were inundated, roads and railways diverted. The death toll so far is 13, killed when a gas pipeline ruptured.

At its peak, the mud volcano, called Lusi, pumps out 150,000 cubic metres a day, enough to fill Wembley Stadium in about three weeks. And it’s been gushing for nearly two and a half years, with no end in sight.

One recent study by a Durham University-led team considered what Lusi would be like if it keeps erupting for another decade. Attempts to cork the volcano by dropping thousands of concrete balls linked by chains into the vent failed completely. Environmentalists fear that diversion of the mudflow into the Porong river will destroy the local fisheries. Meanwhile the levees keep rising.

Mud volcanoes are not well understood, partly because they usually occur on the seabed. What is clear is that a hot, high pressure reservoir of liquid, in this case mostly water, broke through a rocky cap and began percolating through a layer of clay, turning it into mud and carrying it up to geyser forth at the surface.

The cause of this disaster has generated scientific, legal and political debates as heated as the 60C eruption. Two hypotheses are in play, one is that the magnitude 6.3 Yogyakarta earthquake, which killed 6,000 people two days earlier and 260km away, triggered Lusi. The other is that the Banjar Panji-1 drilling rig operated by PT Lapindo Brantas, which was exploring for natural gas just 150 metres from Lusi’s main vent, set it off.

The legal and political arguments swirl around this central scientific issue. Legally the question is who should pay for dealing with the disaster and compensating the victims. If the drilling was at fault, the companies involved should cough up. If it was a consequence of the earthquake, the government is responsible. The stakes are high; the IMF estimates the cost of Lusi at some £2bn.

And that’s where the politics comes in. Lapindo is 50 per cent owned by Energi Mega Persada, part of the business conglomerate controlled by the family of Aburizal Bakrie, Indonesia’s Co-ordinating Minister for the People’s Welfare. Mr Bakrie has been criticised for distancing himself from the disaster, both as a businessman and as a minister. His refusal to visit Lusi prompted angry activists to spray 700kg of mud on his ministry’s gates in Jakarta. Although his family’s company provides food and other aid to the refugees, and has agreed to pay them £240m in compensation, they denounce it at every turn.

The scientific question came to the fore again at the Geological Society of London on 22 October. Proponents of the earthquake hypothesis, employed by the oil companies, claimed that evidence from their well proved its innocence.

Bambang Istadi, a geologist and exploration manager at Energi Mega Persada, argued that if the 2,800m borehole was guilty, a powerful pressure spike, called a kick, would have been observed. Although there was a spike, he said the roughnecks brought it under control in less than an hour, before it could damage the rock formation. Pressure tests since then have shown that the well is intact; with no leaks in or out. Nor is there any evidence of an underground blowout in the formation surrounding the well; if there had been, the borehole’s temperature would have risen to match the volcano’s and the remaining piece of the drill left in the hole would have slipped down into an opening abyss. So if it wasn’t the well, it must have been the earthquake.

Professor Richard Davies of Durham University’s Centre for Research into Earth Energy Systems, who also made a presentation to the Geological Society, remained unconvinced. The kick was powerful enough to damage the rock formation, he argued, and the lower portion of the well had not been sheathed to prevent such problems. The evidence cited by Mr Istadi can be explained if the massive upheaval when the volcano was triggered resulted in the well becoming pressure sealed from what was going on around it. And crucially, the earthquake was too far away and too weak to have caused the mud volcano. So if it wasn’t the earthquake, it must have been the drilling.

The scientific question, then, is far from settled. But progress is being made. So confident are they of their data, that Mr Istadi and the companies have agreed to share it with Professor Davies. If one side or the other can carry the scientific argument, the legal and political issues will be clarified too. For the people whose homes have been swallowed by Lusi, that can only be good.

Paul Rodgers is a freelance science, medicine and technology journalist. He was born in Derby, the son of a science teacher, and emigrated with his family to the Canadian prairies when he was nine. He began writing for a student newspaper in Winnipeg in 1982 and had staff positions on several Canadian dailies. Despite his return to these shores 15 years ago, he still talks with a funny accent.
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Stability is essential to solve the pension problem

The new chancellor must ensure we have a period of stability for pension policymaking in order for everyone to acclimatise to a new era of personal responsibility in retirement, says 

There was a time when retirement seemed to take care of itself. It was normal to work, retire and then receive the state pension plus a company final salary pension, often a fairly generous figure, which also paid out to a spouse or partner on death.

That normality simply doesn’t exist for most people in 2016. There is much less certainty on what retirement looks like. The genesis of these experiences also starts much earlier. As final salary schemes fall out of favour, the UK is reaching a tipping point where savings in ‘defined contribution’ pension schemes become the most prevalent form of traditional retirement saving.

Saving for a ‘pension’ can mean a multitude of different things and the way your savings are organised can make a big difference to whether or not you are able to do what you planned in your later life – and also how your money is treated once you die.

George Osborne established a place for himself in the canon of personal savings policy through the introduction of ‘freedom and choice’ in pensions in 2015. This changed the rules dramatically, and gave pension income a level of public interest it had never seen before. Effectively the policymakers changed the rules, left the ring and took the ropes with them as we entered a new era of personal responsibility in retirement.

But what difference has that made? Have people changed their plans as a result, and what does 'normal' for retirement income look like now?

Old Mutual Wealth has just released. with YouGov, its third detailed survey of how people in the UK are planning their income needs in retirement. What is becoming clear is that 'normal' looks nothing like it did before. People have adjusted and are operating according to a new normal.

In the new normal, people are reliant on multiple sources of income in retirement, including actively using their home, as more people anticipate downsizing to provide some income. 24 per cent of future retirees have said they would consider releasing value from their home in one way or another.

In the new normal, working beyond your state pension age is no longer seen as drudgery. With increasing longevity, the appeal of keeping busy with work has grown. Almost one-third of future retirees are expecting work to provide some of their income in retirement, with just under half suggesting one of the reasons for doing so would be to maintain social interaction.

The new normal means less binary decision-making. Each choice an individual makes along the way becomes critical, and the answers themselves are less obvious. How do you best invest your savings? Where is the best place for a rainy day fund? How do you want to take income in the future and what happens to your assets when you die?

 An abundance of choices to provide answers to the above questions is good, but too much choice can paralyse decision-making. The new normal requires a plan earlier in life.

All the while, policymakers have continued to give people plenty of things to think about. In the past 12 months alone, the previous chancellor deliberated over whether – and how – to cut pension tax relief for higher earners. The ‘pensions-ISA’ system was mooted as the culmination of a project to hand savers complete control over their retirement savings, while also providing a welcome boost to Treasury coffers in the short term.

During her time as pensions minister, Baroness Altmann voiced her support for the current system of taxing pension income, rather than contributions, indicating a split between the DWP and HM Treasury on the matter. Baroness Altmann’s replacement at the DWP is Richard Harrington. It remains to be seen how much influence he will have and on what side of the camp he sits regarding taxing pensions.

Meanwhile, Philip Hammond has entered the Treasury while our new Prime Minister calls for greater unity. Following a tumultuous time for pensions, a change in tone towards greater unity and cross-department collaboration would be very welcome.

In order for everyone to acclimatise properly to the new normal, the new chancellor should commit to a return to a longer-term, strategic approach to pensions policymaking, enabling all parties, from regulators and providers to customers, to make decisions with confidence that the landscape will not continue to shift as fundamentally as it has in recent times.

Steven Levin is CEO of investment platforms at Old Mutual Wealth.

To view all of Old Mutual Wealth’s retirement reports, visit: products-and-investments/ pensions/pensions2015/