A report by the UK's Durham University and Indonesia's Bandung Institute of Technology found that Lusi is now collapsing under her own weight.
Sudden collapses of up to 3m have been recorded at the centre of the mud volcano, according to an AFP report on the study.
"Such sudden collapses could be the beginning of a caldera - a large basin-shaped volcanic depression," Bandung Institute of Technology said in a statement, adding that the caldera could be as much as 146m deep.
The scientists believed the subsidence was due to the weight of mud and collapse of rock strata due to the excavation of mud from beneath the surface.
The volcano has been spewing mud since erupting to life on May 29, 2006 from the Banjar Panji-1 gas exploration well in the Brantas PSC, which was operated by Indonesian major Lapindo.
So far all efforts to stem the mudflow, including dropping huge concrete balls down the hole, have failed.
Twelve villages have been affected by the spreading mud - two were completely deluged - and at least 36,000 people have been forced to flee their homes. Hundreds of displaced families are still awaiting compensation.
The volcano could continue to damage the local environment for years to come, according to study co-author Durham University geologist Richard Davies said.
"Sidoarjo is a populated region and is collapsing as a result of the birth and growth of Lusi," he said.
Joint partner PT Medco and several scientists have said Lapindo's lax drilling practices caused the mud flow. (The operator failed to case the well).
But Lapindo, which is owned by the family of billionaire and Welfare Minister Aburizal Bakrie, claims an earthquake that occurred 300km away two days previously caused the disaster.
The third joint venture partner, Australia's Santos, has declined to comment on the possible causes of the disaster.
In its 2007 annual report, Santos said it had paid cash calls of about $US28.5 million since May 2006. Presumably that amount has increased since the annual report's release at the end of March.
Santos said it had initially raised a provision of $US72 million in relation to the incident, resulting in about $A88.5 million being expenses (at foreign exchange rates applying at the time).
"As part of its review of provisions for the financial year ended 31 December 2007, the company considered it prudent to increase the provision in light of current information," Santos said.
"The total provision (before costs already paid) has been increased to $US79 million."
But Santos acknowledged this provision was based on the assumption that conditions at the site of the incident would "remain stable or improve over the longer term".
The Durham University-Bandung Institute study would not be welcome news for Santos.
The company said in its annual report that there continued to be "uncertainty surrounding the incident and its cost and other implications" and Santos would continue to review the adequacy of its provision in light of developments and available information.
In December, the South Jakarta District Court rejected a lawsuit brought by environmentalists against the Brantas PSC JV.
The court ruled that the mudflow in Sidoarjo district was a "natural disaster" and not caused by gas exploration drilling as alleged by Indonesian environmentalist group, Wahana Lingkungan Hidup Indonesia (Friends of the Earth Indonesia), or WALHI.
The previous month, the same court rejected a case brought by the Indonesian Legal Aid Foundation, which claimed the Government and Lapindo had been negligent in dealing with the effects of the disaster.
WALHI has since filed an appeal with the relevant High Court in Indonesia.
