Minister for Defense Sen. David Johnston made the announcement during a meeting with Papua New Guinea's Minister for Defense Fabian Pok.
The two men met in Australia under the inaugural annual Australia-Papua New Guinea Defense Ministers' Meeting this month.
"This was my first meeting with Dr .Pok and we had valuable discussions on how Australia and Papua New Guinea can work together to advance our mutual security interests," Johnston said.
"I am also pleased to announce that Australia intends to gift Papua New Guinea one Royal Australian Navy Landing Craft Heavy in 2014. The Landing Craft Heavy will assist the Papua New Guinea Defense Force Maritime Element to develop a strengthened sea-lift capability."
In all, eight Balikpapan class vessels were built by shipbuilder Walkers Ltd. at Maryborough, Queensland state, between 1971 and 1974. Six entered service with Australia and two went to Papua New Guinea.
The vessels, at about 150 feet long, have a crew of 13 and can carry a typical load of 175 tons up to 1,300 nautical miles, powered by two GE diesel engines.
Cargo combinations are typically three battle tanks, 23 quarter-tonne trucks or 13 armored personnel carriers.
Australia has retired three of its six vessels while Papua New Guinea continues to maintain its two ships in operational condition.
The Department of Defense announced in December last year that the Wewak, Betano and Balikpapan LCHs were being decommissioned that month with the remaining three -- Brunei, Labuan and Tarakan -- to be retired late in 2014.
Johnston didn't name the vessel that will be given to Papua New Guinea.
Pok was traveling with the commander of the Papua New Guinea Defense Force Brig. Gen. Francis Agwi and Papua New Guinea Secretary of Defense John Porti.
Johnston said the signing of a Defense Cooperation Arrangement with Papua New Guinea in May elevated the long-standing military relationship into a "genuine defense partnership."
Australia's Regional Defense Cooperation program has a budget of just under $94 million in 2013-14 that is being spent on advisers, training and capacity building initiatives.
Johnston said in terms of dollars spent, Australia's biggest individual RDC program partner is Papua New Guinea with a budget of about $25 million in 2013-14.
A new class of LCH vessels will support Australia's Canberra Class landing helicopter docking vessels as part of an amphibious task group.
Navantia built the hulls for the 755-foot LHD vessels Canberra and sister ship Adelaide under a joint project with BAE Systems Australia. About 80 percent of hull construction for both LHD ships was done at the Fene-Ferrol shipyard in Spain.
The Canberra successfully completed a vehicle loading trial at Williamstown, near Melbourne in the southern state of Victoria in November.
The ship moved from its BAE berth, where BAE is integrating the superstructure, hull, combat systems and communications systems, across the bay to Webb Dock, Navy Daily, the navy's official newspaper, reported.
The LHD ships are expected to enter service between 2014 and 2016.