The pre-development agreement is designed to facilitate Front End Engineering and Design (FEED) entry in the event that certain prerequisites are met regarding the sourcing of gas, chemical plant location, and co-location of other industries in particular.

The company stressed this development was in addition to, as opposed to a fallback in case the PNG-QLD pipeline falls over.

"The PNG-QLD pipeline will only account for around half of Oil Search's PNG gas reserves," said an Oil Search spokesperson.

She said the company was not in an 'either/or' situation, it wanted to run both projects in tandem.

The company is yet to finalise a primary source of gas for the project and is still looking at the supply and demand situation from other industries, such as fertiliser, before committing to the development of any potential supply.

With the plant expected to require between 40 and 80 petajoules of gas per year it is seen by Oil Search as a valuable addition to the much hyped PNG Gas Pipeline which is still under negotiation and is estimated to account for around half of the company’s PNG gas reserves.

Oil Search said this was a positive step forward for its gas commercialisation activities in PNG and that a chemical plant is a natural complement to its other initiatives in developing an in-country gas industry in PNG based on the company’s gas resources.

Junior explorer, Cue Energy, also welcomed the announcement, saying both the Barikewa and Kimu gas fields, in which it had minor interests, could potentially be favorably situated to provide gas feedstock to a future chemical plant.