Australian energy firm Santos has denied it's 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 cost the oil firm $684 million.

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

Produced by Radio Australia and Australia Network