Indonesia's Bakrie-tied firm will pay for mud damage

JAKARTA, Aug 13 (Reuters) - Aburizal Bakrie, rated Indonesia's richest man, said on Wednesday a firm linked to his family was not responsible for a massive mud disaster in East Java, but would still pay victims compensation as promised.

The cause of the Sidoarjo mud volcano, which has displaced more than 50,000 people, has been a matter of dispute.

Some scientific studies blamed drilling by Lapindo Brantas Inc., a firm linked to Bakrie's family, while Lapindo and Bakrie said an earthquake near Yogyakarta in 2006 triggered the disaster.

Bakrie, the country's chief welfare minister, said Lapindo had been cleared of wrongdoing by two Indonesian courts.

The company is paying compensation for the flooded land, houses and factories, and has built new housing for victims.

"If two years ago I came there the people shout at me," he said at a lunch for foreign media, but just recently "I went there to the new villages, they are kissing my hand."

Bakrie, considered one of the most powerful politicians in Indonesia's Golkar party, said he did not intend to run for president in next year's elections.

Globe magazine recently ranked Bakrie as the country's richest man with total wealth of $9.2 billion, due to investments in the energy, property and telecommunications sectors.

The government ordered Lapindo to pay 3.8 trillion rupiah ($415 million) in compensation for the mud disaster, and has also footed part of the bill to cover the damage.

On May 29, 2006, hot noxious mud began spewing from a gas exploration site in the industrial district of Sidoarjo in East Java, forming a mud volcano.

The mud is now flowing at a rate of more than 100,000 cubic metres a day and despite various attempts to halt it, including by dropping giant concrete balls into the crater, the mud continues to spew out.

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

PT Energi Mega Persada (ENRG.JK), owned by the Bakrie Group, 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. ($1=9,167 rupiah) (Reporting by Harry Suhartono, Ed Davies, and Olivia Rondonuwu; Editing by Sara Webb) (olivia.rondonuwu@reuters.com; Reuters Messaging: olivia.rondonuwu.reuters.com@reuters.net; Tel +6221 384 6364))