Co-venturers BHP Billiton and Santos told the market this morning that the first phase of the project would involve two subsea wells, three new pipelines and platform modifications.

Gas and liquids would be processed via Exxon and BHP’s Gippsland joint venture facilities.

Santos said its share of costs for the project would be about $140 million, while BHP expects to spend about $500 million. Exxon's subsidiary Esso Australia would be responsible for the remaining $360 million.

The Kipper field is located about 45 kilometres from shore, in about 100m of water, and has a confirmed resource of about 620 billion cubic feet of recoverable gas and 30 million barrels of condensate/LPG.

First gas production is targeted for the first half of 2011, with gross gas output rates starting at about 75 terajoules per day. Estimated field life is 15 years.

Santos said detailed design and procurement of equipment would start next year, with offshore construction and installation beginning in 2010.

Formal approval of the Kipper project follows last month’s decision by Santos to develop the Henry gas field in the neighbouring Otway Basin.

“With Australia’s recent signing of the Kyoto protocol, further gas developments such as Kipper are essential if our economy is to achieve the dual goals of successfully transitioning to a lower carbon footprint, whilst at the same time protecting economic growth,” Santos’ managing director John Ellice-Flint.

BHP Petroleum’s chief executive Michael Yeager said the Kipper development was a “welcome expansion” to his company’s producing assets in the Bass Strait.

“After over 30 years of production, our Gippsland Basin holdings continue to provide significant development opportunities and Kipper is the latest addition,” he said.

“Also, Kipper will be an important part of our eastern Australia gas supply portfolio and will allow us to meet expected south-eastern Australia gas demand.”

The Kipper partners have been under pressure from the Victorian Government to develop the Gippsland Basin field, discovered in 1986.

The State Government is withdrawing the retention leases covering Kipper and is offering a production licence, forcing the partners' hand to fast-track a development plan for the field.

Following stage one, the partners are looking at drilling a further two subsea wells at Kipper in 2015, to increase gross gas production rates to about 150 terajoules per day.

The Kipper joint venture partners are: Santos with 35%, Esso Australia as operator with a 32.5% stake and BHP with 32.5%.