It also signals that despite the collapse in global oil and gas prices, projects to sell gas into the local market, where gas prices are more influenced by the regional supply and demand balance, can still be commercial.
The Waitsia venture in the onshore Perth Basin benefits from its location close to existing processing plants and pipelines that can transport gas easily to the main demand centres in WA.
AWE chief executive Bruce Clement signalled that the venture, once fully developed, had the potential to undercut existing gas supplies into the west coast gas market, which is dominated by the North West Shelf venture and Quadrant Energy.
"Once developed, the onshore Waitsia gas project's low operating costs, in a historically strong west coast gas market, will likely see AWE become the low cost gas producer in Western Australia," Mr Clement said.
The initial stage of the project that has been sanctioned by the partners involves connecting the Waitsia-1 and Senecio-3 gas wells into the existing Xyris production plant, which is to be upgraded. The treated gas will be delivered to the Parmelia pipeline to WA energy users.
The project will tap the Waitsia field's 484 billion cubic feet of gas and will have a capacity of about 10 terajoules a day, with production due to commence in August. Alinta Energy has committed to buy 10 terajoules a day of gas from the venture under a take-or-pay arrangement over two-and-a-half years at a price that has not been disclosed.
In later stages of development, production of the field could be increased to more than 100 terajoules a day, representing about a tenth of WA's daily consumption, Mr Clement said.
BBY has estimated the cost for the full field development at about $170 million.
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