Bali police spokesman Made Sudana said the explosion happened off the coast of Lombok.
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Last June, 25 passengers, including four Australians, were injured in a fire on a fast ferry travelling between Lombok and Bali on Friday.
As well as the Australian on board, the 14 injured passengers included nationals from Portugal, Germany, South Korea and Britain, according to preliminary information from the police. He says all the passengers have been evacuated from the boat.
The explosion occurred about 200 meters (220 yards) from the port of departure, Padang Bai, and was preceded by smoke billowing from the engine, he said.
Karangasem police chief Sugeng Sudarso said the victims were being taken to a clinic in Manggis Village.
Authorities said one of the two killed was a female foreigner.
‘Above it was a battery, maybe there was a short circuit that affected the fuel tank’.
Bali and neighbouring Lombok are the two most popular holiday destinations in Indonesia.
The explosions were an accident and thought to have come from the fuel tank of the ferry, which was carrying 129 passengers, a lot of them tourists.
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Bali has been attacked by Islamic radicals before. Every year a large number of tourists visit these places.
