As many as 60 people are feared dead after a massive landslide wiped out an entire village in a scene of "utter devastation" in Papua New Guinea, reports and aid workers said Wednesday.

The disaster struck near a huge ExxonMobil liquefied natural gas project in the country's rugged Southern Highlands on Tuesday as people slept, leaving a trail of destruction.

PNG media said 40 bodies had been recovered and another 20 people were still missing.

The director of PNG's National Disaster Centre, Martin Mosi, said it appeared lives had been lost but he could not verify how many.

"The numbers are fluctuating and they need to be verified, but yes, there could very well be casualties," he told AFP.

Mosi later told the AAP news agency that four bodies had been recovered at the site and he was "expecting more."

"I am unwilling to put a number on that until I get confirmation from my team," he told AAP.

Staff from Mosi's office were flying to the scene by helicopter to help coordinate the rescue operation and provide a clearer picture of the disaster.

"It was a big landslide and it covered a big area where there used to be small hamlets, so we are expecting a number of deaths," Mosi added.

The Pacific nation's Prime Minister Peter O'Neill also rushed to the site, near Tari, to offer support and see what help could be provided, an official in his office said Wednesday morning.

Nanduka Yandi, an aid worker for US-based NGO Population Services International, was at the scene of the landslide soon after it happened on Tuesday and said many people were killed, with few escaping the carnage.

"It was really huge. It covered 42 houses and only three or four people managed to escape. Everyone else died," he told AFP by telephone.

"It is quite remote and yesterday there was hardly anyone here to dig out the bodies or help people. People lost their entire families. They are in shock."

Describing a scene of "utter devastation" he said tonnes of mud and stones came down in the landslide and "destroyed the whole area."

He recounted how one guest house owner was not in his home at the time and returned to find his wife, children and mother and father all missing.

An aerial shot of the disaster showed mud and other debris extending for at least one kilometre (half a mile) across a forested area.

Yandi said it had been raining in the area at the time, although some locals quoted by the media claimed the landslide was caused by blasting at a nearby quarry.

A spokeswoman for ExxonMobil said all its personnel were accounted for and it was in close contact with the Natural Disaster Centre.

"We have closed down work in the surrounding area," she said.

ExxonMobil's Aus$16 billion ($16.8 billion) LNG project is due to begin production in 2014 and will see PNG's natural gas sold across Asia for the next 30 years.

An eyewitness, Etape Kembe, was quoted by the Post Courier newspaper as saying the area had a transient population with people routinely turning up looking for work at the LNG plant.

"People from all over PNG live in this place due to the LNG project. It is hard to tell the exact number of people that may be buried alive," he said.

AusAid, the Australian government's aid agency, said PNG had asked it to join an assessment mission to the affected area.

"The outcome of this assessment will determine the need for further assistance from Australia," a spokeswoman said.

Local MP Francis Potape told the Australian Broadcasting Corporation he feared there could be further landslides as the area was still very unstable.

"We could still see rocks still coming down in front of our eyes and we could also see water trapped in the mountainside rushing out," he said.