The two companies will enter into a joint operating agreement and separate farm-in agreement under which ConocoPhillips will acquire a 51% stake in the permits.

ConocoPhillips will pay Karoon $US9.6 million ($A12.9 million) as reimbursement for about 80% of the costs incurred in carrying out the second year work program for the permits, which involved acquiring, processing and interpreting 1200 square kilometres of 3D seismic and 800km of 2D seismic data.

The farminee will also funding 80% of the costs of the third year work program for the permits, which will require drilling one exploration well in each permit, including testing. The cost of the third-year work program is estimated to be between $60 million and $80 million.

Under these agreements, ConocoPhillips has the option of acquiring a further 9% interest in the permits by paying 80% of the next $125 million of joint venture expenditure.

“ConocoPhillips brings substantial expertise and extensive knowledge of gas exploration and LNG production to the joint venture,” Karoon said today.

“The joint venture with ConocoPhillips greatly reduces the monetary commitments required from Karoon in the Browse Permits. The option for ConocoPhillips to take up an additional 9% of the permits is also very advantageous to Karoon, as, if exercised, this will ensure Karoon does not have a large financial commitment as the joint venture moves ahead with additional exploration or appraisal work.”

The permits are located less than 10km from the giant Scott Reef/ Brecknock gas and condensate fields complex, estimated by Woodside Petroleum to contain about 21 trillion cubic feet of recoverable gas reserves with 210 million barrels of condensate.

Karoon says its mapping and geologic analysis demonstrates that the same play type with similar large structures on trend occur across the company’s WA-314-P and WA-315-P permits.