ExxonMobil Corp, the world's biggest oil company, and BHP Billiton Ltd have approved a second major oil and gas development in the Bass Strait, after giving the go-ahead to a $US1.25 billion ($A1.3 billion) project.
The Turrum project is located 42 kilometres off the Victorian coast in the Gippsland Basin and is expected to start producing from 2011, with gas sales from 2015.
Turrum's formal go-ahead comes seven months after ExxonMobil and BHP Billiton approved the $US1.1 billion ($A1.15 billion) Kipper gas project, which is also located in the Gippsland Basin.
"The primary driver for the Kipper and Turrum projects has been the increase in the demand for gas," ExxonMobil Australia chairman Mark Nolan told reporters in Melbourne on Friday.
Mr Nolan said that the demand for gas in Australia would remain "very strong" at an average growth rate of 3.8 per cent per annum out to 2030.
Shares in BHP Billiton dipped 30 cents to $37.25 by 1121 AEST.
The Turrum project is a 50/50 joint venture between ExxonMobil and BHP Billiton.
Development of the project includes the construction of a new platform - Marlin B - which will be linked to the existing Marlin A platform, as it is upgraded and refurbished.
The project partners expect to recover about one trillion cubic feet of natural gas and 110 million barrels of oil and gas liquids from the Turrum field.
Mr Nolan said Turrum was one of the largest gas developments to come onstream in Victoria and had enough energy to supply a city of one million people for over 20 years.
BHP Billiton and ExxonMobil have been operating together in the Bass Strait for the past 40 years.
"Our Bass Strait resource base continues to have significant opportunities to develop, even after producing for nearly four decades," BHP Billiton petroleum chief executive Mike Yeager said in a statement.
Federal Resources and Energy Minister Martin Ferguson said the Turrum project could be the start of a new generation of oil and gas developments in Bass Strait.
"Since 1964, Bass Strait has contributed $2.2 billion annually to Australia's gross domestic product," he said in a statement.
"It it has contributed more than $300 billion in taxes as well as supported more than 50,000 jobs in Victoria for 44 years."
It was worth noting the venture was between a home-grown Australian company and a foreign investor, Mr Ferguson said.
"We need to continue to provide an environment which encourages investment and unlocks Australia's resource wealth."