BHP Billiton is pulling out of the Browse Basin gas projects, off the West Australian coast, after reaching an agreement to sell its stake to PetroChina.
The joint venture is led by Woodside, which plans to process liquefied natural gas at the proposed gas hub at James Price Point, north of Broome.
Environmentalists have led numerous protests against the planned $35 billion gas hub.
In August, Chevron got out of the project, selling its stake in the consortium to Shell.
Under the latest deal, BHP will sell its 8.3 per cent stake in the East Browse field and 20 per cent interest in West Browse for a combined total of $1.63 billion.
The miner says it is a great deal which will see PetroChina, China's largest oil and gas producer, acquire an interest in the gas projects and see BHP Billiton exit a non-strategic asset.
Several months ago it was suspected BHP would pull out after it complained about high costs.
A resource analyst, Alexis Clark from Patersons Securities, thinks BHP has offloaded its stake because it is getting too expensive and there will be long delays.
"BHP has made the decision they don't want to be there for the long term," he said.
"I think BHP do potentially do have concerns on the economics, I think they believe it might go ahead, but it might be drawn out, it might be uneconomic if the development is an onshore LNG plant." Onshore vs offshore The deal is still subject to regulatory approval and the Browse joint venture participants hold a right to offer to match the transaction.
Woodside has the largest stake in the development, Shell is the second biggest shareholder and smaller interests are held by BP and Japanese consortium, MIMI.
Mr Clark says he does not believe the joint venture partners will look to increase their stake.
"I don't believe the other joint venture will pre-empt and match the bid," he said.
"I think Shell are probably pretty comfortable with the level of interest they've got in the project at the moment and the interest they've got can still give them enough right to push for a floating LNG project." Shell is known to prefer the offshore processing option whereas Woodside, as the operator, is proposing to process onshore at James Price Point.
A final investment decision on whether it is economic to proceed at the onshore LNG precinct is due by the middle of next year.
The WA Premier Colin Barnett, who has been a firm advocate of onshore processing, has welcomed the deal.
In a statement, he says the Government has been pushing for Chinese investment in the project and believes it is a step forward.
But, the state's Opposition Leader Mark McGowan says BHP's decision is not a good sign.
"All the feedback we get is this project won't happen," he said.
"The major cause of that is the Premier interfering and intervening and creating a business environment which is not friendly and that's the outcome, that major investors will pull out."