US energy giant Unocal has signed a deal with Bangladesh state-run firm Petrobangla to develop the country's largest gas field.
Unocal discovered Bangladesh's largest gas field in 1998
Domestic gas demand has been growing by about 15% annually in recent years and the Bibiyana field will help ease a shortfall, officials say.
A processing plant and a 25 mile (40 km) pipeline connection to the national grid will also be built.
Unocal has a number of existing deals with the Bangladesh government.
Petrobangla currently produces 1,365 million cubic feet (mcf) of gas per day, against current demand of 1,400 mcf.
The Bibiyana field - about 180 miles north-east of the capital Dhaka - has a reserve of 2.4 trillion cubic feet of gas and would produce up to 300 mcf per day from 2006.
Development cost for the project, including up to 15 development wells, has been estimated at $230m (£123.9m), said Unocal.
The Bibiyana field was discovered by Unocal in 1998.
A BBC correspondent says its development was held up by Bangladesh's refusal to allow the gas to be exported to India.