Marathon International Petroleum is to develop the south-west Kinsale gas field which was discovered in 1995.

Bord Gais has agreed terms for the sale of the gas and deliveries are planned for the fourth quarter of this year. The financial details of the contract between the companies were not disclosed.

Marathon already supplies gas to Bord Gais from its Ballycotton field, which came on stream in 1991.

The south-west field is not regarded as significant, although it is estimated to contain reserves which should last until at least 2005. However, Bord Gais still needs a major gas supply and this is expected to come down to a choice between Enterprise Oil's deposit off the coast of Achill Island or the construction of a new interconnector with Britain.

The chief executive of Bord Gais, Mr Philip Cronin, said the development of the south-west field allowed the company to "schedule our gas supply arrangements in a manner which will make the most beneficial use of indigenous supplies".