Entry into FEED follows the execution of a 25-year power purchase agreement with PNG Power last December.
Under the agreement the project will use woodchips sourced primarily from new indigenous plantation trees grown in more than 18,000ha of underused Kunai grasslands in the Markham Valley, about 55km north-west of Lae to generate up to 30MW of renewable, biomass-fired, baseload power for the Ramu grid.
Lae is the second largest city in PNG, hosts the largest cargo port of the country and is the nation's industrial hub and needs a reliable source of power.
The project is targeted to come on stream in 2019.
Oil Search now owns 100% of the project, having recently bought out Dr Keiran Wulff's Aligned Energy's 30% interest.
The FEED will cost around $US15 million and should be complete within nine months.
FEED activities will focus on refining the technical and commercial aspects of the project to support a final investment decision, which is expected to be made before the end of 2017.
"This project is one element of Oil Search's new power business, which seeks to deliver scalable, reliable and competitively-priced power to domestic, commercial and industrial markets in PNG," Oil Search managing director Peter Botten said.
"Oil Search's power business aligns with the PNG government's policy to rapidly and materially increase access to electricity within PNG.
"Entry into FEED for the Markham Valley Biomass Project highlights our commitment to supporting the Government's objective of delivering power solutions for the local market. In addition, the project will provide significant long term opportunities for communities within the project area.
"Oil Search is evaluating a range of other potential PNG-resourced energy solutions and is discussing partnering with key PNG energy companies to deliver alternative energy supplies and lower carbon power solutions for PNG."
The project had originally expected to start construction of the initial 15MW unit before the end of this year.
Once established the project is expected to create more than 500 permanent full time jobs in the local area.
The PNG biomass project, Oil Search's first, is a result of several years of nursery research, plantation trials and engineering assessments, in cooperation with Markham Valley landowners, the PNG Forest Research Institute and PNG Forest Authority.
Oil Search says Markham Valley will comply with the certification requirements of the World Bank, Equator Principles and Forestry Stewardship Council.