Oil Search clinging to PNG-Brisbane line

Oil Search has put on a determined face in its ongoing plans for the PNG-Queensland gas pipeline project as negotiations with potential customers reach a tense stage.

However, the company appears to be hedging its bets after disclosing that it was working on a $400 million gas stripping project that could become its major focus if the pipeline were to fall over.

The pipeline project is yet to receive a solid commitment from a number of buyers such as Comalco, Korea Zinc and the embattled Stanwell Power Station near Rockhampton.

The future of the Stanwell Power station is especially seen as one of the key holding points in future negotiations as it is potentially one of the pipelines' biggest Australian customers.

The station, linked to the Stanwell Australian Magnesium project, has struggled to come online due to a number of cost restructures and funding issues. Earlier this month AMC announced that it would probably require another $150-$200 million to complete construction of the project, pushing the total cost estimate over the billion dollar mark.

Understandably the PNG government is desperate to get the $6.8 billion, 3,200 kilometre pipeline project underway as soon as possible and has already accused the Australian government of failing to support the project, despite its statement that it has been encouraging several companies step up their negotiations on the project.

In the longer term, the project is expected to stimulate major new investments in PNG in fertiliser production, gas-fired electricity generation and further gas processing facilities for export markets. The PNG Gas Project will unlock gas reserves which have been lying dormant for the past decade because there has been no domestic market for gas in PNG.