Production from the Sangu field averages about 34 million cubic feet per day, while net proven and probable (2P) gas reserves acquired are 34 billion cubic feet.

The acquisition provides Santos with a 37.5% interest in the Magnama gas exploration well, which spudded earlier this month in offshore Block 16 and is expected to reach total depth by early December.

In return for the assets, Santos has agreed to pay $US50 million in upfront cash, as well as $20 million in staggered payments depending on exploration results.

Managing director, John Ellice-Flint said the acquisition was consistent with Santos strategy of becoming a leading Asian energy company.

"This new country entry is very attractive for Santos and provides exposure to material exploration upside in a proven prolific hydrocarbon province," he said.

"We are pleased to be partnering with Cairn, who have extensive experience in the region.

"This acquisition is another step in our Asian growth strategy, and follows on from our capture of a prospective acreage position in the Bay of Bengal offshore India in early 2007."

Under the deal, Santos will acquire Cairn Energy Bangladesh from a subsidiary of Cairn Energy PLC, which holds a 37.5% interest in the Sangu Development Area, a 37.5% interest in Block 16 exploration acreage, and a 45% interest in exploration Blocks 5 and 10.

All of the permits will continue to be operated by Cairn, which will retain holdings equal to those acquired by Santos.