The refinery, which is currently being constructed across the harbour from Port Moresby, will process 32,500 barrels per day of crude oil.

Late last year, InterOil signed a consent deed with the PNG Government which ratifies the state project agreement for InterOil's refinery project, as well as for project financing from the Overseas Private Investment Corporation (OPIC), an agency of the US Government.

InterOil has also completed the construction of the refinery project's main sea causeway, which will enable the construction of the main jetty and wharf facilities.

As for the deal itself, BP will supply 100 per cent of the crude oil feedstock of the InterOil Refinery. InterOil will receive a Bond from BP for US$8.4 million which it said will enhance the credit of InterOil with the OPIC. The transaction contracts are effective as of December 21, 2001 and extend for five years following commencement of the refinery's commercial operations.

"The backing by BP of the InterOil refinery in PNG can result in savings to both InterOil and the domestic producers. Both companies will be working closely together to ensure optimised logistics for PNG oil producers and InterOil," InterOil said. BP currently markets about 65% of the PNG domestic production.