The quake hit part of New Britain, about 200 kilometres south-west of the town of Rabaul at a depth of nearly 40km, just before 7:00am local time, the United States Geological Survey reported.
Following the tremor, the Pacific Tsunami Warning Center said it had the potential to generate a tsunami.
The Pacific Tsunami Warning Center initially warned hazardous tsunami waves were possible in coastal areas 300km from the epicentre.
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But scientists do not have any tide gauges close to where the natural disaster happened, so are unable to say at this point whether tsunamis have been generated. Following the quake, at least two aftershocks were reported that scored more than 5 on the Richter Scale. The quake killed at least 100 people.
The magnitude 7.0 quake was followed by aftershocks of magnitude 5.7 and 5.9.
The Indonesian archipelago is in an area that experiences intense seismic and volcanic movements, which produce about 7,000 earthquakes each year, most of which are of moderate magnitude.
In March, a magnitude-6.6 quake struck nearby with no casualties or damage reported. It caused massive panic and even prompted some residents to left the capital of Bali, Densapar. The tremor's epicentre was in the Bali Sea around 40 kilometres off the eastern end of Java island, according to the United States Geological Survey.