By Liam Fox
ABC Port Moresby
In May the government threatened to terminate the project agreement because it didn't like InterOil's design.
Now the Prime Minister Peter O'Neill says cabinet has approved a "50/50 Gulf LNG Project" with the state to take up a 50 percent equity interest, much more than the 22.5 percent allowed for under PNG law.
In a statement, Mr O'Neill said the fiscal incentives in the current project agreement will have to be reviewed and an experienced operator found to operate the upstream facilities.