Australian energy firm Santos has denied it has understated the severity of a mudflow near its gas exploration well in Indonesia.

Santos owns an 18 per cent stake in the East Javan project where a mud eruption in May led to the displacement of more than 10,000 people.

Santos has put aside around $US79 million to clean up the mud but the Australian Financial Review newspaper says a United Nations report has found it could actually cost the oil firm about $684m.

In a statement today, Santos says its provision for the disaster is appropriate.

Santos shares have fallen nearly four per cent to $AU18.61.

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