Last week, foundation customer Australian Gas Light Company shocked proponents of the PNG pipeline project with an announcement it intends to buy gas from incumbent Australian gas producers in a $2 billion deal, leaving a gapping hole in gas demand that needed filling.

However, MIM has committed to take up to 25 petajoules of gas a year for 20 years from 2007 to supply its McArthur River lead and zinc mine.

The contract was conditional on a feasibility study for the onsite production of zinc metal at McArthur River, due to be completed next December, a company official from MIM said.

"Its been tough week for the project - particularly Oil Search - but we're not totally out of the game and this announcement with MIM will hopefully help give us the credibility that the project is still alive," said ExxonMobil vice president of exploration, Bill Threlfall.

"We're still trying to make the project work without AGL and we believe it is still possible to make it go but it is going to be hard work."

The announcement has seen Oil Search's shares climb 3c on the announcement and is now at trading 62c.