He said that Lapindo's drilling at the well without using special casing had not caused the problem and that the method had been give the greenlight by Indonesia's energy watchdog.
Lapindo is indirectly controlled by PT Energi Mega Persada Tbk, partly owned by the Bakrie Group, which is controlled by the family of the welfare minister.
Lapindo, which has been told to pay $425 m in compensation for mud victims and for efforts to stop the flow, has also separately denied it has done anything wrong.
The minister added that "it happens in a lot of places of the world", citing Uzbekistan and other parts of Java.
He said that one million barrels of mud were spewing from a hole in the earth each day in the Sidoarjo area near Indonesia's second largest city, Surabaya, but said "that hole is not the hole drilled by Lapindo".
Several experts have said the mudflow could have been triggered by a crack about 1,800 metres deep inside the well.
The minister denied that attempts to channel the mud into the sea were hurting the area's valuable shrimp industry by polluting the water.
"There is nothing that can cause the shrimps to die."
Anger has been mounting in the area over the hot mud, which has continued to pour out despite several government attempts to plug the leak that has inundated entire villages.
The leak has also been blamed for a gas pipeline explosion in the area that killed 13 people.