Canadian-based Interoil, listed on the Toronto Stock Exchange, said it had formed a new entity in combination with Merrill Lynch Commodities and an affiliate of Clarion Finanz AG known as the Natural Gas Development Company.

The new entity has subsequently signed a memorandum of understanding with the PNG Government. InterOil said the MOU would result in the company assisting in the domestic processing of natural gas in PNG for the proposed $US2.5 billion ($A3.25 billion) pipeline project.

InterOil also said it had secured a $130 million non-convertible credit facility to finance the development, which is proposed to process 5 million tonnes of LNG per year.

“The formation of the National Gas Development Company will allow InterOil to develop projects knowing that the burgeoning growth in the demand for gas and its associated liquids in this region must be filled,” InterOil chairman and chief executive Phil Mulacek said.

“The solid infrastructure that InterOil has built in PNG is ideally suited and situated for developments in this area.”

“We are now in a strong financial position and able to take advantage of the many new

opportunities and synergies in the development of energy-related businesses in Papua New Guinea.”