BHP Billiton agreed to sell its stake in the Browse liquefied natural gas (LNG) project to Chinese oil and gas producer PetroChina for $1.63 billion, the second partner to leave the project in recent months.
The $30 billion Browse project has been plagued by controversy over its proposed location at James Price Point on the northwestern coast of Australia, which has been opposed by some project partners, environmentalists and Aboriginal landowners.
BHP's exit also comes against the backdrop of soaring costs for the $170 billion worth of LNG export projects under construction in Australia, thanks to labor shortages, logistics challenges and the strength of the Australian dollar.
"This is an excellent opportunity for both companies," BHP's petroleum division chief Michael Yeager said in a statement. "PetroChina has acquired an interest in a world class gas resource and BHP Billiton has exited a non-strategic asset."
BHP said the remaining joint venture partners in the Browse project - operator Woodside Petroleum, Royal Dutch Shell, BP, Japan's Mitsui & Co and Mitsubishi - have the right to match the offer from PetroChina.
Barring that eventuality, BHP expects the deal to close in the first half of next year, pending regulatory approvals.
State-controlled PetroChina, the country's dominant oil and gas producer, has earmarked close to $16 billion for overseas investment this year as it aims to have half its production outside China within 8 years.
The deal will require approval from Australia's Foreign Investment Review Board, given PetroChina is state-owned.
Australia's foreign investment rules are generally seen as more open than North America, as Australia only blocks investments that are deemed to be against the "national interest".
A KPMG report in August found Chinese firms invested $45.1 billion into Australia in 116 deals between September 2006 and June this year. Ninety-two of those deals were made by 45 Chinese state-owned enterprises.
Australia has set a course of overtaking Qatar as the world's top exporter of LNG later this decade, but cost blowouts are threatening the viability of that aim.
(Read more: Australia Business Confidence Slumps in November)
BHP Billiton is selling an 8.33 percent stake in East Browse and 20 percent of West Browse. The sale follows Chevron's exit from the project in August when it sold its interest to Shell.
Chevron last week also revised up the costs for its Gorgon LNG export complex by $15 billion to $52 billion.
Woodside is scheduled to make a decision on whether to go forward with the James Price Point location by mid-2013.
The Australian Conservation Foundation (ACF) is battling construction of a plant to process gas from the project along the Kimberley coastline, a remote and environmentally sensitive region in far northwestern Australia.
Environmentalists and some indigenous landowner groups want the gas piped to other locations, which they say could include areas around the existing North West Shelf gas hub further south.