Santos withdrew from the project two years ago, but has been talking about participation to Oil Search, one of the pipelines’ consortium partners, according to the newspaper article.

Santos holds 31% equity in the Hides gas field – a large field crucial to the pipeline project with a contingent resource of 370 million boe. In October Hides finally moved to the front end engineering and design (FEED) stage after a seven-year wait.

Santos also wants to use its under-utilised Moomba plant in South Australia to process the PNG gas, the report said.

The pipeline project's partners - ExxonMobil (XOM), Oil Search, Nippon Oil and a unit of the PNG government – have moved the project into the front-end engineering and design phase.

Last month Santos issued a statement in response to media speculation it was trying to get back into the pipeline project.

"Santos Limited advises that it is not presently a participant in the PNG Gas Project, and it has not made any decisions relating to the PNG Gas Project. If and when any decisions are made that require disclosure, Santos will make the necessary announcements," the company said.

But the brief statement did not include any denial that negotiations were taking place and the rumours don’t look like going away.

If both the PNG government and Santos take up stakes in the project, Exxon Mobil's share will drop from 39% to about 26%, and Oil Search's stake will reduce from about 54% to 47%, Port Moresby-based Oil Search said last month.