The well - located in ATP 471P (Myall Block) - will be drilled to a depth of 2120 metres and target the Permian Tinowon zone, which will be nitrogen-drilled to minimise any damage to the formation by drilling muds.
Mosaic said as a result of the sole risk operation, any increase in proven and probable reserves resulting from the well would be booked to it.
"Santos may elect to join any Churchie-3 production operation at a later date if it elects to pay a penalty to Mosaic equal to approximately five to seven times the cost Santos would have paid (being 51%) if Santos participated in the Churchie-3 operation," Mosaic said.
Mosaic added all wells in the Churchie area have encountered gas and its technical analysis indicates the area could have recoverable reserves in excess of 100 billion cubic feet of gas, valued at around $100 million.
