Elk-2 is about 4.7km north-west of the Elk-1 discovery, on which InterOil has based its plans for an LNG business in PNG. The company is also planning to use the appraisal well to test for an oil leg.
The second well will test the entire 610m Puri and Mendi limestone section found in a down-dip position.
It is expected to take about three months to drill to about 3050m and will cost $US12.5 million.
InterOil chairman and chief executive Phil Mulacek said an “extensive” testing program designed to better understand the natural gas potential in the Elk structure would be started once the hole reached target depth.
InterOil says it is confident the Elk discovery will underpin a US$4-6 billion LNG joint venture between itself, global merchant bank Merrill Lynch and Clarion Finance.
PNG LNG, the private company that will develop the LNG project, has set itself a schedule that could see two LNG trains built at its proposed site in Port Moresby, with the first LNG shipment ready by 2011.