Indonesia mud disaster cost seen doubling - govt

JAKARTA, March 5 (Reuters) Indonesia's public works minister said today investigations showed the damage bill from a mud volcano would come in at around 7.6 trillion rupiah (3 million), double earlier estimates.

The mud has inundated entire villages following an oil-drilling accident in May in Sidoarjo, an industrial suburb near Surabaya city in the east of Java island, and destroyed toll roads and some railways tracks.

President Susilo Bambang Yudhoyono said in December that PT Lapindo Brantas, the operator of the well, would have to pay 3.8 trillion rupiah to victims and for efforts to plug the mud flow.

A team set up by the government told a parliamentary commission today the cost would be much higher due to funds needed to relocate infrastructure such as railways and toll roads.

''The cost is estimated at around 7.6 trillion rupiah,'' Public Works Minister Djoko Kirmanto told reporters. ''But Lapindo is only capable of paying a total of 3.8 trillion rupiah, we don't know about the rest.'' The commission recommended funds from the state budget to help finance the infrastructure development.

Lapindo and PT Energi Mega Persada Tbk, which indirectly controls it, dispute whether the mud flow was caused by the drilling and also whether Lapindo alone should shoulder the cost.

Energi is owned by the Bakrie Group, controlled by the family of Indonesia's chief social welfare minister, Aburizal Bakrie.

Lapindo holds a 50-per cent stake in the Brantas block from where the mud is gushing. Energi International Tbk holds 32 per cent and Australia-based Santos Ltd the remaining 18 per cent.

Anger has been mounting in the area over the hot mud, which has continued to pour out despite several government contingency plans to plug the leak.

Some 10,000 people have been displaced since the mud flow began, causing an unfolding environmental disaster in the Sidoarjo area, near Indonesia's second largest city of Surabaya.

REUTERS PDM PM1826