Melbana Energy (ASX:MAY) is set to welcome major oil and gas company Santos (ASX:STO) as a partner in the WA-488-P permit that contains the Beehive prospect, which could contain 388 million barrels of oil or its equivalent.

Santos said it would exercise its option to acquire a 40 per cent interest in the permit, though French giant TOTAL chose to step back from its option to acquire a further 40 per cent in WA-488-P.

As a result of TOTAL’s retreat, Santos’ now has the option to acquire an 80 per cent stake in WA-488-P in return for funding 100 per cent of the costs of drilling the Beehive-1 exploration well.

Santos has until December 4 to exercise the modified option. Should it choose not to do so, the major will not acquire any interest in the permit and Melbana’s interest will remain at 100 per cent.

A recent 3D seismic survey over Beehive, which is located close to the producing Blacktip gas field, also de-risked the prospect by confirming some key technical characteristics such as the depositional patterns within the platform and the seaway that were not apparent on previous 2D data.

“Santos’ recently announced decision to acquire the northern Australian assets of ConocoPhillips, consistent with its aim to be a leading regional LNG supplier, make it a particularly exciting time for the energy sector in northern Australia,” Melbana chairman Andrew Purcell said.

“There is a great deal of interest from industry in these developments and we are confident that our Beehive prospect has a role to play there given other recent regional successes, its shallow water position close to existing infrastructure and the increased confidence in the prospect resulting from the newly processed 3D seismic survey acquired by Santos and TOTAL.”

Last month, Santos acquired ConocoPhilips’ northern Australian business for $US1.39 billion ($2.02 billion).

This includes operating interests in the producing Darwin liquefied natural gas (LNG) and Bayu-Undan projects along with the Barossa development that could provide feedstock for the Darwin LNG project.

Together with last year’s acquisition of Quadrant Energy, Santos now has a leading position in Western Australia’s domestic gas market and natural gas assets in northern Australia.

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