(Reuters) -Woodside Energy Group said on Tuesday it had entered a deal with LNG Japan to sell a 10% participating interest in its $12 billion Scarborough liquefied natural gas (LNG) project in Australia for $500 million.

Australia's No.1 independent oil and gas producer, which owns 100% of the project since merging with BHP in 2022, has long flagged its interest to sell down its stake in the venture.

Woodside will hold a 90% interest in the Scarborough joint venture and remain its operator after the completion of the deal, which is expected in the first quarter of 2024.

"The support of LNG Japan is testament to the quality of the Scarborough project. It also underscores the ongoing demand from Japanese buyers for new supplies of gas and the role of gas in supporting Japan's energy security," Woodside CEO Meg O’Neill said in a statement.

Gas from Scarborough will feed Woodside's Pluto LNG plant, and the first LNG cargo is targeted for 2026. The Scarborough gas field development and Pluto LNG plant expansion together make up Woodside's biggest growth project.

The Scarborough development was 38% complete at the end of June, with Pluto Train 2 module fabrication ramping up, according to Woodside.

As part of a broader strategic relationship, Woodside and LNG Japan also entered an agreement for the sale and purchase of 12 LNG cargoes per year for 10 years starting 2026. LNG Japan is a 50:50 joint venture between Sumitomo Corp and Sojitz Corp.

Woodside also said it had entered into deals with Sumitomo and Sojitz to collaborate on global opportunities in new energy, which could include ammonia, hydrogen, carbon capture and storage.

Woodside shares were up 0.7% at 0330 GMT, while the broader market was 0.1% higher.

(Reporting by Himanshi Akhand in Bengaluru; Editing by Subhranshu Sahu and Rashmi Aich)