Merrill Lynch has a 35% stake in a project to build an LNG production plant, which plans to have funding finalised by the second half of 2008 and be delivering LNG cargoes by the second quarter of 2011. A private equity firm and Canadian oil and gas player InterOil are the other shareholders.

LNG will be frozen and loaded onto tankers and shipped mainly to the United States, where Merrill Lynch has access to pipelines.

InterOil has said it plans to develop an LNG plant near Port Moresby fuelled largely by its Elk gas discovery.

"We would like to be able to pull the trigger this year," Mulacek told Petroleum magazine in July. "We are not going to fool around here."

Mulacek outlined Toronto-listed InterOil's advanced plans for an LNG development, citing the company's existing infrastructure, its experience in bringing major infrastructure online and the advanced studies already undertaken. Now the company has also made a significant gas discovery, Elk, which could hold up to 3Tcf, he said.

InterOil has been working on its LNG development plan for almost four years, according to Mulacek.

Pre-front-end engineering design work has generated a preliminary capital cost estimate of around $US3 billion ($A4 billion) for a plant to be located in the capital.

In May, InterOil announced it had formed a relationship with Merrill Lynch. Then in June it said it had recruited former North West Shelf LNG project director Dr Jack Hamilton to head its LNG operations.

Merrill Lynch has also flagged the launch of an LNG spot trading desk during the fourth quarter of this year.

The announcement is in line with Merrill Lynch’s strategy of growing its standing in the gas industry, following on from its purchase of trading house, Entergy-Koch Trading, in 2004.