Australia’s Santos has signed an agreement with Apache Corp to develop and produce from two natural gas fields offshore Western Australia.

Santos, the country’s third-largest gas producer, said the combined operations of the Halyard and Spar fields will supply about 10% of the state’s gas needs from 2012.

Under the agreement Santos sold 55% of its working interest in its Spar development to Apache for an initial payment of $31m with the total amount going up to $116m depending on the well’s level of certified reserves.

As operator Apache will hold a 55% equity in both fields while the remainder will be owned by Santos.

Production from Halyard is expected to start in mid-2011 while Spar will come online in late 2012.

Production from the combined operations is expected to come online at an initial gross rate of 50TJ per day, which will then increase to over 100TJ per day by early 2013 depending on the outcome of the Spar 2 well, Santos said.