It said it had retained Morgan Stanley, Macquarie Capital and UBSAGas as joint financial advisors to solicit and evaluate proposal from potential strategic partners.
The move to engage in a formal process to find an internationally recognised LNG operating and equity partner came about following inquiries from potential partners and in consultation with the PNG government.
InterOil said the strong Asian LNG market, interest in exploration and investment in PNG and its reservoir analysis and project design fundamentals contributed to the decision.
Late last month, PNG Petroleum and Energy Minister William Duma said the national executive council believed InterOil's plans were far from being a world-class project of international scale and quality as originally proposed in late 2009.
Rather, InterOil's Gulf LNG plans for a 3 million tonne per annum onshore plant using Energy World Corporation-developed modular LNG trains in Gulf Province and a 2MMtpa floating LNG facility were described as "fragmented" and a far cry from LNGL's 6-9MMtpa plant adjacent to InterOil's Napa Napa oil refinery near Port Moresby.
Duma claimed that since May 2010, his department's secretary had been conveying the government's requirements to InterOil and its LNGL joint venture to deliver the project contemplated in the agreement struck back in 2009.
The minister said the developers ignored the concerns and proceeded to publicly promote a different project without seeking the government's prior approval.
"I have also reminded LNGL and InterOil to comply with their contractual obligations to deliver a world-class project with the support of a world-class LNG operator," Duma said.
Duma said that while the Gulf LNG project included a number of "high-quality" partners, they were not internationally recognised LNG operators.
He added the government remained supportive of a second LNG project by InterOil and LNGL but the onshore plant project agreement had to be complied with.
Pacific LNG, InterOil's partner in LNGL, defended the joint venture's move, saying the initial Napa Napa site appeared to make less sense than a Gulf province site for the LNG plant based on economic and technical analysis that had since been undertaken.