COOPER Energy has snapped up a 50 per cent interest in Santos’ Sole gas field and the Orbost gas plant in the Gippsland basin for $27.5 million as it talks up the opportunity to develop a Cooper basin-style hub in the region.

Cooper stumped up an initial $2.5 million and will fund all of the initial $50 million project costs, as part of plans to establish the Orbost gas facility as a strategic hub to develop their Basker-Manta-Gummy (BMG) and Sole fields, along with other potential plays.

Located in the offshore Gippsland basin, the Sole gas field is about to enter front end engineering and design (FEED) and is expected to begin production in late 2018 or early 2019.

Cooper managing director David Maxwell said the “cornerstone transaction” cemented the company as an emerging player in the eastern gas market, following a two-year campaign to direct the business away from oil.

“I think in time you will see some combination between BMG and Sole, so you would view this as one area, one region in the same way portions of the Cooper basin are combined,” Mr Maxwell said.

Capital expenditure for the project has been calculated at $600 million, which would be split between Cooper and Santos after the initial outlay, for an expected output of 70,000 gigajoules a day, and a reported annual revenue of between $150 million and $200 million.

Mr Maxwell said the deal would more than double the company’s Gippsland gas resources and give Cooper a stake in a gas hub which would assume growing significance in the eastern-states market.

“It is much easier to expand existing plants than build new plants up to a point and therefore we view the Orbost plant in some respects as a hub, as an opportunity to take gas from Sole, Longtom, BMG, other fields which are undeveloped nearby, and new exploration opportunities,” Mr Maxwell said.

“Sole gas development will also open up new possibilities for commercialisation and development of other gas resources in the Gippsland region.”

Mr Maxwell was unwilling to reveal expected operating costs publically but said FEED would cost between $25 million and $29 million.

FEED was expected to be complete in the first half of 2016, during which time gas market offtake contracts and project construction finance would also be developed, in readiness for a final investment decision in the third quarter of calendar 2016.

Santos remains operator on the project but the project manager will report to a board of representatives from both companies.

Cooper expects the transaction to add about 100 petajoules (PJ) of gas to its best estimate of contingent resources, which stands at 120PJ from the Basker Manta Gummy gas and liquids project, located adjacent to Sole.

Mr Maxwell said eastern Australia needed new sources of gas, gas prices were increasing, and Gippsland basin resources were among the most competitive and reliable available.

“We are in discussions with gas users who have expressed an interest in Cooper Energy’s Gippsland basin gas resources and now expect those discussions to broaden with the news that the Sole gas field is moving towards FEED,” Mr Maxwell said.

“Gas sourced from conventional gas reservoirs using existing infrastructure and in close proximity to the eastern gas pipeline are sound ingredients for commercially successful gas projects in eastern Australia.”

Cooper said the gas would be sourced from conventional reservoirs and would use existing infrastructure to plug into the eastern gas pipeline for transfer to the Victoria and New South Wales markets.