The Canadian-based company said the well had been drilled to a depth of 1614m and was presently being flared.

Once the well is stabilised, InterOil said it would then determine the gas entry point and drill out below the liner into the Puri limestone.The well is targeting a depth of 3000m.

Elk-1 is located in PPL-238 in the company's Eastern Papuan Basin exploration portfolio, which includes PPL-237 and PPL-236.

InterOil owns the Napa Napa refinery in Port Moresby, the only petroleum refinery in the country.

Earlier this month, the company indicated its interest in the possible development of a natural gas liquids facility and an onshore liquefied natural gas facility in PNG.

InterOil has formed a new entity, the Natural Gas Development Company, together with Merrill Lynch Commodities and an affiliate of Clarion Finanz AG. The new company recently signed a memorandum of understanding with the PNG Government with regards to the two developments.

InterOil also said it had secured a $130 million non-convertible credit facility to finance the developments.