Managing director Peter Botten said the Oil Search and Exxon Mobil joint venture would examine increasing capacity, from the original 1.5 petajoule per year estimate to 3PJ or more pa, to accommodate a bigger market and a potential petrochemical plant.

Botten said the revised capital cost increases would be known by the year's end.

“Costs, like most major projects, are likely to be higher than originally proposed, due to sizing increase, upward pressure on steel prices and oil field services,” he said.

The joint venture is also looking for more markets in Queensland, the Northern Territory and the southern states, Botten said.

Oil Search is confident the project will receive approval, reflecting similar sentiments from AGL last week, which said it was “absolutely confident” PNG Gas would go ahead.

Botten said the FEED program was 93% complete and proceeding, with an increased scope due to new laterals.

All components of the program are now being finalised to allow a project sanction decision for early next year, as well as at the close of the 2005/06 financial year, he said.

Oil Search owns 54.2% of PNG Gas and operator Exxon holds 39.4%.

Botten said talks were continuing with Santos Ltd about buying gas and taking an equity stake in the project.

Two smaller investors in the project are Nippon Oil Exploration Ltd. with 3.4% and MRDC, a Papua New Guinea company representing landowners, with 3%.

The PNG Gas project would transport natural gas to Australian customers via a 3,000-kilometre A$2.5 billion pipeline to be built by the Australian Gas Light company and Malaysia's Petronas.