Yesterday the partners announced the formal go-ahead for the field. Gas production is expected to start in the first quarter of 2006, subject to standard regulatory approvals.

Also announced was a new gas sales agreement in which Santos, AWE and Mitsui have the option to supply SPI Electricity Pty Ltd, trading as TXU, with up to 420 petajoules (PJ) of gas for the Victorian or South Australian markets over 12 years.

This was a exploration-enabling contract which catered for the immediate commercialisation of future gas discoveries said a Santos announcement.

The new gas sales agreement is an expansion on the initial gas sales deal announced in September 2003 for TXU to take 293 PJ of gas with an option for another 105 PJ of gas over a further three years. The agreement is conditional upon the granting of the necessary regulatory approvals and it was unusual in that it commercialised the Casino resource before appraisal drilling had confirmed the quantity of gas available.

Raw gas from the sub-sea facilities at the Casino field will be transported to the coastline through a sea-floor pipeline that will come ashore via a directionally-drilled underground shore crossing and transported via a buried pipeline to TXU’s Iona processing facilities. These facilities have been specifically designed to minimise any adverse environmental impact.

After processing at the Iona plant, sales-quality gas will be supplied to industrial, commercial and domestic customers in Victoria and South Australia and be used in electricity generation.

Planned annual production from the Casino gas project is anticipated to plateau at 35 PJ per annum based on the Proven plus Probable gas reserves (2P) of 285 PJ.

Field construction activities are due to start in first quarter 2005 and conditional approval for six major contracts worth in excess of $150 million has already been granted.

Located about 30km offshore from Port Campbell in about 70 metre-deep water, the Casino gas field will be the first commercial development within VIC/P44.

An active exploration drilling program is planned for VIC/P44 to seek additional gas reserves. The first of these exploration wells, Martha-1, is expected to spud shortly.

Interests are Santos Limited (Operator) 50%, Peedamullah Petroleum Pty Ltd (wholly-owned subsidiary of AWE) 25% and Mittwell Energy Resources Pty Ltd (wholly-owned subsidiary of Mitsui) 25%.