The companies each own a 50% stake in Petroleum Retention Licence 4, situated in the west of the nation close to the Indonesian border.

Horizon, which will be operator of the project, said in an announcement today that it expected to produce about 140 million cubic feet of gas, of which 4000 barrels per day would be recovered using a two-train refrigeration plant.

Any gas not sold would be re-injected into a reservoir and saved until required for sale, Horizon said, with negotiations with potential buyers currently underway.

Front end engineering and design on the project had been completed, with the cost of developing the entire resource estimated at about $300 million.

Horizon said its target of first production by the end of 2013 was “aggressive, but achievable” provided there were no delays in the approval process.

The FID approval was also contingent on Horizon receiving debt financing on satisfactory terms.

As Upstream reported in November last year, the licence has recoverable gas reserves on a contingent basis are of 361 billion cubic feet while recoverable condensate is at 11.4 million barrels.

The project would initially be developed as a condensate recovery project, with gas sales to take place as potential customers, envisaged to be either domestic or large industrial customers, were contacted.

Having made the decision, Horizon said both it and Talisman would apply for a production development licence for the project from the PNG government by the second quarter of this year, expecting to receive it by the third quarter of 2012.

If awarded, this would trigger a right held by government nominee Petromin PNG to take a 22.5% interest in the project by reimbursement of both Horizon’s and Talisman’s allowable past costs associated with that interest.

If that were to happen, the stakes of Horizon and Talisman would be reduced to 38.75% each.

Published: 27 January 2012 09:31 GMT  | Last updated: 75 minutes ago