Energy company Lapindo, part of the business empire of Welfare Minister Aburizal Bakrie, said it would pay 15 million rupiah (1,260 dollars) a month to each displaced family until all outstanding compensation was settled.

Lapindo said the instalments would eventually total 100 to 150 million rupiah representing 80 percent of the value of properties destroyed in the mudflow. It says it has already paid the remaining 20 percent.

"We'll start disbursing the compensation on March 3," Lapindo vice president Andi Darussalam Tabussala told AFP.

"Some of the the victims will receive full compensation by the end of this year. We'll finish the compensation by 2010."

The mud burst from one of the company's gas wells in East Java in 2006, killing 13 people and displacing about 36,000.

The company has never accepted responsibility but has agreed to pay compensation to 8,000 families whose homes and villages were buried beneath the mud.

Victims have expressed anger at repeated delays to the payments, with the company most recently blaming the global financial crisis for its failure to meet its obligations.

"There is no one that hasn't been affected" by the international credit crunch, Tabussala said.

A lawyer for the victims, Taufik Basari, said that the compensation scheme failed to benefit all the families affected by the disaster.

"There are still some families who are not included in this compensation scheme. Some victims who feel that the compensation scheme was unfair still want to negotiate further with Lapindo," he said.

The mud volcano has swamped 12 villages in East Java.

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