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Indonesia mud victims compensated

4 December 08 18:44 GMT

The Indonesian energy company blamed for making thousands of people homeless by causing a mud volcano in 2006 has agreed to fully compensate the victims.

The company, Lapindo, was operating in the area when the volcano erupted, but has denied its drilling was to blame.

The volcano, which erupted near Surabaya in East Java, destroyed villages, factories and farmland and displaced more than 50,000 people.

Many families have received payments for 20% of the value of their homes.

Jakarta protests

Payments for the remaining 80% of the compensation are to begin this month and reportedly amount to $8,000-$12,000 (100-150m Indonesian rupiah) per family.

The energy company is owned by the family of Indonesia's Welfare minister, Aburizal Bakrie.

Its failure to pay out the rest of the compensation has led to protests by victims. They have been in Jakarta since Monday to pressure the government over the delayed payments.

The breakthrough was reached after Indonesia's president, Susilo Bambang Yudhoyono, demanded on Wednesday that Lapindo and victims' groups fighting for compensation reach an agreement to end two years of bitter legal wrangling.

Despite the deal, two factors may take the shine off the agreement, says the BBC's Lucy Williamson in Jakarta.

Lapindo has failed to meet deadlines for payment before and this is a particularly bad time for the Bakrie family.

Earlier this year, Mr Bakrie was reported to be Indonesia's richest man but the family business has been struggling to survive the effects of the global financial crisis.

Some victims have reached separate relocation deals with Lapindo, but many have been waiting for the company to honour its promise.

The mud volcano erupted in May 2006, two days after a major earthquake in East Java.

Lapindo has always said the quake was to blame for triggering the volcano, but many scientists dispute the claim, saying the company's poor drilling practice was the cause.

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