The troubled 4000km project has suffered a succession of blows since August when increasing costs forced partner, Australian Gas Light, to stop engineering works.
Oil Search on Tuesday told investors in the United States that it is considering ditching the project, which needs “clarity of direction”.
“Partners (were) reviewing ways of optimising returns in the present cost environment,” it said in a presentation.
But the company said it “was confident a robust economic project can be achieved with partner alignment”.
Oil Search said it was concentrating on other development options, which included supplying to petrochemical plants in PNG’s capital, Port Moresby, liquids cycling and the development of liquefied natural gas.
It was also focusing on exploration activity in the Middle East and North Africa, where it will drill more than 40 wells in the next 18 months.
Addressing the Good Oil conference in Perth earlier this month, managing director Peter Botten said his company still regarded the pipeline as an economically viable project but implied it would move on if there were further delays.
“We have a lazy 4 trillion cubic feet of gas waiting in a market that is hot,” he said.
“We need to commercialise our gas and position ourselves in the value chain.”
The company is already considering establishing a petrochemical complex with Japanese majors Mitsubishi and Itochi that could take gas feedstock of 150 petajoules a year.
It is also contemplating a separate ammonia/urea fertiliser production facility to be built with India’s Oswal Industries, the owner of the Burrup ammonia plant in Western Australia.
Botten said a decision on the pipeline by the end of this year would still deliver gas to Australian markets in 2009-2010. A petrochemical plant would involve similar timing and could take a quantity of gas similar to the pipeline.
The Port Moresby-based oil and gas producer is in the process of a five-year plan to double its market capitalisation by 2010 and commercialise its resource of 1 billion barrels of oil equivalent in gas and liquids.
Operator of the gas field, ExxonMobil, is expected to announce by the end of September if the project will go ahead.
ExxonMobil is also reviewing the potential of LNG production, which is possible from 2013, Oil Search said.
