While this is a small amount of gas for a big company like Santos, several deals such as this could help Santos overcome difficulties it has been having in meeting spot gas contracts from its Cooper Basin operations.

The new contract will take effect on or before January 1, 2006 on completion of existing contracts with Santos QNT.

Mosaic's chief executive officer Lan Nguyen said the new contract offered long-term benefits for the joint venture.

"This contract plus sales from current producing oil, LPG and other gas contracts will generate total base revenue for Mosaic in the range of A$15 to $17 million per annum assuming oil price of US$45 per barrel," he said.

The Churchie Field has proven to be liquids rich and any increase in gas production will provide further marketable quantities of LPG and condensate, Nguyen said.

"This contract gives Mosaic a good commercial return on its investment in the Churchie field," he said. "The infrastructure to supply this contract is already in place".

The jointly owned Wallumbilla LPG Plant (Santos 50% operator and Mosaic 50%) will be used to process the LPG for sale.

Interests in PL 192 (Churchie field) are Mosaic Oil 49% (operator) and Santos Group 51%.