JAKARTA: Security forces in Indonesia's restive Papua region have surrounded separatists holding captive a New Zealand pilot, but will exercise restraint while negotiations for his release continue, a top security official said on Tuesday.

Philip Mehrtens, a Susi Air pilot, was taken hostage by the West Papua National Liberation Army (TNPB) on Feb. 7 after landing in the remote region of Nduga.

The rebels say they will not release Mehrtens, 37, unless Indonesia's government recognises the region's independence and withdraws its troops.

Chief security minister, Mahfud MD said security forces had found the location of the group holding the pilot but would refrain from actions that might endanger his life.

"Now, they are under siege and we already know their location. But we must be careful," Mahfud said, according to local media.

He did not elaborate on the location or what steps Indonesia might take to free the pilot.

Susi Air's founder and owner said on Wednesday 70% of its flights in the region had been cancelled, apologising for the disruption of vital supplies to remote, mountainous areas.

"There has to be a big humanitarian impact. There are those who are sick and can't get medication...and probably food supplies are dwindling," Susi Pudjiastuti told reporters.

Separatists have waged a low-level fight for independence since the resource-rich region, once governed by the Netherlands, was brought under Indonesian control following a United Nations-supervised vote in 1969.

Hostage-taking of foreigners has been rare and the conflict has escalated since 2018, with rebels mounting deadlier and more frequent attacks.

Indonesian military chief, Admiral Yudo Margono said operations were complicated by the presence of civilians in the area.

"It is not easy to catch this group as they are mingling with the locals. We will prioritise persuasive measures," he said in a statement.

Security forces have previously said a "law enforcement operation" had been planned, but only as a last resort if negotiations failed.

The government has so far used prominent figures in Papua such as politicians, priests and local leaders to communicate with the hostage-takers.