Managing director Peter Botten said participants in the gas project were reviewing a revised pipeline development, which involved a staged construction that will initially service the northern Queensland towns of Gove, Townsville and Gladstone in 2010. A line to Mt Isa would follow and be onstream in 2012.

The new configuration aims to better use existing pipeline infrastructure and reduce capital costs.

“Preliminary analysis has proved encouraging and the participants are carrying out further due diligence on this option, including discussions with existing pipeline owners and new potential pipeline participants,” Botten said.

“Customer interest in buying gas remains high.”

Due diligence is scheduled to conclude early in the new year when the participants will decide whether they will pursue the option.

The project has been in limbo since part owner Australian Gas Light significantly scaled back its involvement.

In the meantime, Oil Search is pushing ahead with several “other options” that may commercialise its gas resources.

“Oil Search’s vision to develop maximum value from its oil and gas business involves the sequential development of the PNG Gas Project and in-country petrochemical industries, followed by LNG,” Botten said.

“As part of our gas commercialisation projects, we are embarking on an active appraisal and exploration drilling program to further prove up additional contractable gas reserves to support these potential projects.”