Dec. 1 (Bloomberg) -- Talisman Energy Inc., the Canadian oil and gas producer with interests in Papua New Guinea, said it’s studying the use of a floating liquefied natural gas plant for its Pandora discovery in the Gulf of Papua.

The company believes the technology, which has yet to be used in a commercial project, may be suitable for developing the field, which is estimated to hold at least 1.5 trillion cubic feet of gas, Terry Buchy, manager of engineering business development at Talisman, said today in Sydney.

Rising energy demand and advances in technology are spurring gas producers to consider tapping fields that were previously considered either too small or too far from coastlines to be profitably developed. Floating LNG plants may cost one-third as much as an onshore plant and take less than half the time to construct, Citigroup Inc. said in an April report.

“There are a number of development options, including that of, potentially, floating LNG,” Buchy said at a conference. Other options include selling gas to an onshore LNG plant or for petrochemical production, and further technical work is required to make a decision, he said.

Pandora, which is about 280 kilometers (174 miles) from an existing processing plant, lies in “benign” seas in the Gulf of Papua that would be suitable for floating LNG, Buchy said. Talisman plans to drill appraisal wells at the field in the second half of 2010 as well as potential exploration wells nearby, said Lawrence Bernstein, responsible for the company’s exploration in the Pacific nation.

LNG is natural gas chilled to liquid form, reducing it to one-six-hundredth of its original volume, for transportation by tanker to destinations not connected by pipeline.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net

Last Updated: December 1, 2008 00:48 EST