PNG Prime Minister Mr Merkere Morauta said last week the proposed merger of Orogen with Oil Search had "convincing advantages over the Santos proposal" and on behalf of the state-owned MRDC formally accepted the scrip-cash merger offer of Oil Search.

Speaking after a meeting of PNG's National Executive Council, Mr Morauta said the NEC had endorsed a recommendation to accept the $1.5 billion merger with Oil Search.

The Santos bid for Orogen Minerals received a set back last week after Orogen director's sent a letter to the ASX recommending shareholders vote in favour of the merger with Oil Search. "The board remains of the view that shareholders should, in the absence of a superior offer vote in favour of the merger," Orogen said. Orogen minority shareholders will meet on Tuesday to vote on the proposed merger.

Santos still have another option to increase their interests in the PNG pipeline project, which could prove a major threat to their Cooper Basin gas monopoly. They also have 25% of the large Hides gas project.

ChevronTexaco are said to be in the process of opening a data room in Port Moresby next month to allow prospective buyers to run their rulers over their suite of PNG assets. Given the company has stepped back from project operator status, Santos could emerge as the new owner of their stake - around 12% before the PNG Government's equity.