Woodside Petroleum Ltd says it is selling its 51.55 per cent stake in the Otway Gas Project to its joint venture partner, Origin Energy Ltd, for $712.5 million.

Woodside said the transaction included its interest in the Otway Basin offshore and onshore facilities and permits, for a total $712.5 million.

In a separate statement, Origin’s managing director, Grant King, said the transaction included production licenses including the Thylacine and Geographe fields and adjacent exploration permits, together with associated offshore production facilities, pipelines and onshore gas processing plant.

“As an existing joint venture party with a 30.75 per cent interest in the Otway Gas Project, we have undertaken the purchase with detailed knowledge of the asset, reserves, infrastructure and potential of the surrounding acreage,” Mr King said.

“The Otway Gas Project is a premier asset with established production.

“Increasing our interest in the project provides additional earnings from natural gas sold under existing long-term contracts to TRUenergy as well as from LPG and condensate sold from the liquids-rich gas stream.

“Importantly, it also provides greater access to the growth potential and exploration upside of the area.”

Woodside said the effective date of the transaction was July 1, 2009, with the transfer of ownership expected to occur next month, subject to a pre-emption process under the joint venture agreement and normal regulatory approvals.

Upon completion, Origin will assume operatorship of the Otway project, with the transition expected to occur by the second quarter of calendar 2010.

The sale of Otway is consistent with Woodside’s previously announced strategy of reviewing non core assets, Woodside said.

Origin’s Mr King said the transaction would be earnings accretive from the first full financial year following completion.

Origin will fund the transaction from $4.4 billion of cash reserves as at September 30, as well as undrawn bank facilities, he said.

Origin would book earnings from the time of completion, and the purchase price would be adjusted for the net impact of costs and earnings between the effective date and completion.

The transaction is subject to pre-emptive rights held by the joint venture parties, which include Benaris International NV and CalEnergy Gas (Australia) Ltd.

Origin said that, if these rights were exercised, the parties may elect to proportionally increase their interest in the joint venture on terms equivalent to that agreed in the Woodside-Origin transaction.

Referring to Origin’s existing southern Australia gas operation, BassGas, Mr King said that, as operator of both projects, Origin would see benefits from adding scale and capability, placing it in “a strong position to optimise exploration and development activities in the region.”