The latest update on the much-anticipated PNG Gas project, which is expected to produce first gas in 2009, was provided as part of Oil Search’s European Road Show presentation, submitted to the Australian Stock Exchange this morning.

And in what could be the strongest indicator yet that a deal between Oil Search and Santos is imminent, Santos was listed in the presentation as holding a 9.49% stake in the project, with Oil Search’s interest diluting to 37.18%.

Santos holds a 25% stake in the Hides gas fields, which are close to the fields currently linked with the PNG Gas Project, so the company has long been touted as a likely partner in the development.

Meanwhile, Oil Search said it also expected to release deals of a bankable finance plan for the project shortly, however, the much-anticipated project sanction has now been delayed to the second half of this year.

The company also reiterated recent statements to the market that initial output would be at plant capacity of 250 petajoules per annum.

Oil Search said markets were “largely underwritten” and it was not actively seeking additional markets, given conditional and firm sales contracts of up to 229PJpa were already in place.

Agreements between the government and landowners, recently the subject of a two-week roundtable discussion in Port Moresby, were also said to be close to being finalised, while an environmental management plan was also said to be well advanced.

Progress was also said to have been made on tariff negotiations with APC, the 50:50 joint venture involving Australian Gas Light Company and Petronas responsible for construction of the $A3 billion PNG-Queensland pipeline project.

The pipeline, covering 4000km and connecting the PNG Highlands with far north Queensland, will allow for sale of gas into the east coast markets of Australia.