The Adelaide-based major, in partnership with Australian Worldwide Exploration and Mitsui, this morning announced the formal sanction of the Henry gas field development project, located offshore Port Campbell in Victoria.

Discovered in 2005, the Henry gas field will be developed using existing infrastructure associated with the Casino gas field, which started production early last year.

Developing Henry will let the Vic/P44 JV to make additional gas sales to TRUenergy under an existing agreement for processing at its Iona facility.

Santos chief executive John Ellice-Flint said this development was consistent with his company’s strategy of leveraging its gas infrastructure to commercialise additional gas volumes in the eastern Australian market.

“The Henry development will facilitate higher gas sales volumes and extend the production plateau from the Casino project facilities by several years,” he said.

“In addition, the subsea infrastructure has been designed to accommodate future additional gas discoveries in a timely and cost effective manner.”

Ellice-Flint added the joint venture had drilled three exploration wells in this permit with a 100% success rate, which he said gave “confidence to pre-invest for further success”.

AWE managing director Bruce Wood said Henry represented a “logical” expansion of the Casino gas system.

“The commitment represents a logical step in our gas commercialisation strategy, where we anticipate further value capture in coming years,” he said.

The development involves drilling and completing the Henry-2 well, as well as the Netherby-1 sidetrack if the exploration well planned for mid 2008 is successful.

In addition, 17km of subsea pipeline and control umbilical will be installed from the existing Casino facilities to Henry and Netherby, and a further 5km to the Pecten East location.

Henry-2 and Netherby-1 will be connected and commissioned through the Casino infrastructure to the gas-processing facility at Iona.

Santos stressed the final project scope was still subject to the results of the exploration wells on Netherby and Pecten East.

First gas production is targeted for the first half of 2009, with flow rates of 120 terajoules per day from the combined Casino and Henry development.

Proven and probable (2P) reserves at Henry are estimated to be 150 petajoules of dry gas.

The Vic/P44 permit is in the Otway Basin offshore Victoria, about 8.5km north of the Casino field, and 250km southwest of Melbourne.

The Vic/P44 JV comprises Santos, as operator with 50%, AWE with 25% and Mitsui with the remaining 25%.