PERTH (miningweekly.com) – Australian gas producer Santos on Monday reported that it was looking to develop a new Western Australian gas supply from its Halyard field, which it jointly owns with Apache Energy.

The two companies would now complete and tieback the Halyard well, and subject to the outcome of the Spar 2 appraisal well, would also complete the tie back of the Spar well as part of this development.

To facilitate the development of these two wells, Santos has sold a 55% working interest in the Spar well to Apache, for an initial $31-million payment, with the potential to add an additional $85-million, depending on the level of certified reserves in Spar.

Santos said in a statement that the development was a significant new addition to the Western Australian supply portfolio, with the gas from this area expected to supply around 10% of the state’s domestic gas needs from 2012.

The Halyard project is expected to come on line by mid-2011, followed by Spar in late 2012. Production from the combined development is expected to come on line at an initial gross rate of 50 terrajoule (TJ) a day, and was then expected to increase to over 100 TJ/d by early 2013, depending on the outcome of the Spar 2 well.

Santos would hold a 45% equity in both the Halyard and Spar projects, while Apache would hold the balance, and would act as operator of both fields.

Santos vice president for Western Australia and Northern Territory, John Anderson said that the transaction was an important step in the execution of its strategy to grow its domestic gas business in Western Australia through this acreage in relatively shallow water, allowing quick development cycle time.

“Haylyard and Spar are perfectly positioned to be developed in the near term by tying the gas fields back to the existing gas hub at Varanus Island,” said Anderson.

“Santos is pleased to build on its important relationship with Apache in Western Australia, and is confident Halyard and Spar will make a significant contribution to the state’s domestic gas supply.”

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