Two years on, Indonesia mud volcano still flowing

By Heri Retnowati

PORONG, Indonesia (Reuters) - Two years after a mud volcano started erupting on Indonesia's Java island, thousands of people who lost their homes are still living in squalid makeshift shelters with no signs the flow of sludge is about to stop soon.

On May 29, 2006, hot noxious grey mud began spewing from a gas exploration site in the industrial district of Sidoardjo in East Java, forming what is now known as the Lusi mud volcano.

The mud has now displaced more than 50,000 people and submerged homes, factories and schools and is now flowing at a rate of more than 100,000 cubic-meters a day.

"We don't sleep well at night. We hardly have anything to eat," said Widariana, one of more than 2,000 people who have lived in a market converted into shelters for the displaced.

Some scientists say the mudflow, near the country's second-biggest city, Surabaya, was caused by a gas drilling operation by energy firm PT Lapindo Brantas.

Lapindo disputes that the disaster, which started two days after a huge earthquake in Central Java, was caused by drilling.

PT Energi Mega Persada indirectly controls Lapindo, which holds a 50 percent stake in the Brantas block from where the mud came. PT Medco Energi International Tbk holds a 32 percent stake and Australia-based Santos Ltd the rest.

The government has ordered Lapindo to pay 3.8 trillion rupiah in compensation to the victims and to cover the damage.