InterOil Corporation has achieved another significant milestone in its efforts to commercialise the Elk/Antelope natural gas field in Papua New Guinea, after the country's National Executive Council (NEC) approved the company's project agreement for the construction of an LNG plant.

The approval builds on InterOil’s strong record of success in Papua New Guinea, including setting two world records for natural gas flows.

As previously announced, the proposed LNG project would be developed by InterOil and its joint venture partners, including foundation partner Pacific LNG Operations Ltd. The Government of Papua New Guinea, through its nominee Petromin PNG Holdings Limited, will have up to a 22.5% equity interest in the project.

The project targets a $7bn two-train LNG facility, with each train capable of producing approximately 4 million tons of LNG per annum.

While current plans call for first production of LNG towards the end of 2014 or beginning of 2015, InterOil is progressing a proposed liquids stripping plant, to be located in Gulf Province, in late 2011 or early 2012, which would provide an attractive revenue stream to Papua New Guinea before the LNG project is expected to be completed.

The approved project agreement establishes the terms for commercialising and monetising the Elk/Antelope natural gas resources. InterOil expects that natural gas produced will be treated at a conditioning plant in the Gulf Province and then transported to the proposed LNG plant site near the company’s existing refinery at Napa Napa.

InterOil anticipates that the LNG plant will be designed to operate as a tolling facility, and that the LNG will be jointly marketed by the upstream owners on behalf of the joint venture.

Sir Michael Somare, Prime Minister of Papua New Guinea, reportedly enthused, “The government of Papua New Guinea has had a long and successful partnership with InterOil, and we are pleased to build on our relationship through this agreement. The strategic LNG project proposed by InterOil has the potential to provide significant benefits to the people of Papua New Guinea for years to come.”

Joshua Kalinoe, Petromin’s Managing Director, added, “Petromin is excited to be a major partner of the InterOil LNG project in Papua New Guinea, which has the potential to measurably benefit PNG’s economic development. We look forward to a long and prosperous relationship with InterOil and believe that this project is designed to create new business opportunities, enhance training, and provide advanced education for the people of Papua New Guinea.$quot;

Commenting on a resoundingly successful milestone for the company's project, InterOil CEO Phil Mulacek concluded, “This approval is another major milestone in advancing the monetisation and commercialisation of our resources we have established at the world class Elk/Antelope fields. The infrastructure envisioned to complete the LNG project firmly establishes incentive for further exploration in the country.$quot;

$quot;We look forward to moving ahead with the LNG project and working with the people and governments of Papua New Guinea.”