Chevron external affairs manager Cliff Leggoe told Reuters the pipeline hinged on supply agreements with major gas users but the government memorandum of understanding signed this week would help the project.

``It is a clear message from the three governments that they fully support the pipeline, he said, referring to the Australian, PNG and Queensland governments.

``That should give a level of comfort to some of the potential customers, he said.

Under the proposal, Chevron would produce and sell the gas, with the Australian portion of the pipeline to be owned and operated by a joint venture of Petronas of Malaysia and The Australian Gas Light Co.

Potential users of the gas include Comalco Ltd which is considering whether it will build an alumina refinery inQueensland or in Sarawak, Malaysia.

Leggoe said Chevron was optimistic agreement with end-users, including Comalco, would be finalised in the next few months. ``We are encouraged by current discussions we are having with Comalco, he said.

The proposed $3.5 to A$4 billion pipeline would run 2,600 km from the Southern Highlands of PNG to Gladstone, with a spur line into Townsville to bring power to industrial users.

A memorandum of understanding to speed government approvals for the project was signed on Wednesday by Papua New Guinea prime minister Bill Skate and Queensland premier Peter Beattie.

The memorandum was also signed by Skate and Australian prime minister John Howard in Canberra on Monday.

Completion of the pipeline has been scheduled by the end of 2001.