Santos Ltd is near to signing a $2 billion contract with Royal Dutch Shell involving the sale of a stake in its coal seam gas-to-liquefied natural gas (LNG) project, according to the Australian Financial Review.

Shell is negotiating to acquire 30 to 35 per cent of Santos' Gladstone LNG project, and Santos was also close to inking long-term LNG sale agreements with China's Sinopec Corp and South Korea's state-run Korea Gas Corp, the AFR said.

Shell would become the operator of Gladstone LNG (GLNG) plant, which will convert coal-seam gas into LNG. It would fuse its own Curtis Island LNG project into Gladstone, which is considered to have a superior site for an LNG processing facility.

Spokesmen for both Santos and Shell declined to comment on the market speculation.

Adelaide-based Santos currently has 60 per cent stake in Gladstone LNG. Malaysian state-owned energy giant Petronas owns the remaining after buying the 40 percent in 2008 for $2.5 billion.

In an effort to cut its funding requirements and secure new LNG buyers for the project, Santos has been trying to sell down its interest in Gladstone over the past year.