ExxonMobil and Oil Search, Papua New Guinea’s leading oil and gas producer, have ditched a $5.5bn plan to build a gas pipeline between PNG and Australia, saying they would focus instead on other more “promising investments” to tap into the vast gas reserves of the Pacific nation.

The decision was anticipated as the project had been stalled for six years amid concerns about its costs and the number of potential buyers in Australia.

Oil Search said yesterday it would now seek to tap into rising demand in Asia for liquefied natural gas and was considering building either a new LNG facility or a petrochemical plant in PNG. The group also said it had recently been talking to potential Chinese buyers for its gas.

The pipeline was meant to transport LNG from the Hides and Angore gas fields, which are majority owned by Oil Search but operated by ExxonMobil.

PNG has long been regarded as an underdeveloped country by the oil industry because of its rich gas reserves – it already has more than 15,000bn cu ft of proven gas reserves. Indeed, last November InterOil, a Toronto-listed junior resources company announced it had made what could prove the PNG’s largest gas discovery.

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