PERTH (miningweekly.com) – Australian energy major Santos has sold a 50% stake in its Sole gas field and the Orbost gas plant, in Victoria, to fellow-listed Cooper Energy.

Under the terms of the agreement, Cooper would acquire its share in the gas field and gas plant for an initial A$2.5-million in cash. Cooper would also be sole-funding the initial A$50-million in initial project costs.

The Sole gas field is about to enter into detailed front-end engineering and design (FEED), with production slated to start in late 2018 or early 2019. The gas would be sourced from conventional gas reservoirs, using existing gas infrastructure, and was in close proximity to the Eastern Gas pipeline, which is linked to Victoria and New South Wales.

The FEED phase would be completed by the firs half of 2016, and gas offtake contracts and project finance was expected to be developed in parallel with the FEED, in readiness for a likely final investment decision by the third quarter of 2016.

Cooper MD David Maxwell said on Tuesday that the acquisition would be significant to advance the company’s gas strategy.

“This can be a cornerstone transaction for our developing offshore Gippsland basin gas. When completed, it will more than double our Gippsland gas resource and give Cooper Energy a 50% stake in a gas project being prepared for final investment decision and a gas hub, which will assume growing significance in the Eastern Australian gas market.”

Maxwell said that the Sole gas development would also open new possibilities for commercialisation and development of other gas resources in the offshore Gippsland region.

The Sole project was expected to comprise a single vertical subsea well and pipeline to the Orbost gas plant, which is already connected to the Eastern Gas pipeline. The Orbos gas plant was currently processing gas from the Longtom gas field, and the plant would require some modifications to process gas from Sole.

Santos recently announced plans to reduce its 2015 capital spend from $2.7-billion to $2-billion, as a means to insulate the company from the current volatile oil price.