Drilling of the first appraisal well, Fossetmaker-1, was expected to start in late August to early September, Nexus said.

Under the farm-out terms, Shell has paid Nexus $5 million cash and will fund the first $US30 million ($34.5 million) of the drilling costs for this first well.

Shell has an option to fund the first $US25 million of a second appraisal well to earn a 34% interest in the entire WA-377-P permit.

“This is not just a matter of funding; it is an important partnership for Nexus in the even that the Fossetmaker-1 well is successful in defining a significant gas resource at Echuca Shoals,” Nexus managing director Ian Tchacos said.

Fossetmaker-1 will be drilled about 7 kilometres east-northeast of the Echuca Shoals discovery well using the Ocean Epoch drilling rig contracted by Shell.

While Nexus will remain the permit operator, Shell will be in charge of drilling this well.

Tchacos has said his company, which will retain a 66% stake in the discovery, believed the resource could be large enough to support its own liquefied natural gas project.