Santos has entered into an asset swap deal with the US-based Magellan Petroleum for Northern Territory gas fields.

Portland-based Magellan said in a statement it had entered into an agreement with Santos to buy its respective 48 per cent and 66 per cent stakes in the Palm Valley and Dingo fields.

The deal will also involve the transfer of Magellan’s 35 per cent interest in the nearby Mereenie field to Santos.

Magellan will receive a cash consideration of $25 million and will be entitled to bonus amounts with a cumulative possible value of $17.5 million, based on production thresholds at the Mereenie fields over the next 20 years.

The parties have also entered into a long-term gas supply and purchase agreement whereby Magellan will sell Santos 25.65 petajoules of gas from the Palm Valley fields over a 17-year term, representing all of the field’s remaining reserves.

“The contract is subject to completion of the asset swap and shall commence on the later of the first delivery of gas by Mereenie to a new gas customer and January 16, 2012, which is when the existing gas sales agreement for the Palm Valley gas field expires,” Magellan said.