Santos managing director John Ellice-Flint said the Northern Territory needs a second generation fuel source to take over and expand the role the ageing Mereenie field has successfully played.

"Over the last year, Santos has completed a major geotechnical re-evaluation of the resource potential of the Petrel Tern fields," Ellice-Flint said.

"The field contain around 1,400 petajoules of contingent gas resources and with an anticipated local demand of around 60 petajoules, the fields have the near shore volumes, security of supply and potential processing upside, to service local demand for up to 25 years."

The announcement by Santos has sparked speculation in the Australian media that Woodside and Santos are in discussion now about the possibility of jointly developing their respective Bonaparte Basin fields, totalling 2 trillion cubic feet of gas.

According to a report in The Australian, a proposal would see Woodside's Blacktip discovery linked with Santos' Petrel and Tern discoveries that would compete directly with the PNG gas project to supply Northern Australia.

Last year, Woodside flagged a joint development of Bonaparte after it become clear that there was not enough domestic demand to provide a foundation market for the Sunrise gas project.