The Commonwealth has officially signed over ownership of 65 per cent of the largest gas field in the Browse Basin to the WA Government, relinquishing up to $2 billion in royalties.

A satellite sweep on the basin last year discovered three tiny rocky outcrops, 300 kilometres off the state's north-west coast.

While they sit no more than one metre above sea level at high tide, they are considered islands, meaning much of the Scott and Seringapatam Reefs belong to WA and not the Commonwealth.

The chance find prompted a redraw of Australia's maritime boundaries, and a ruling that the field was actually in state waters.

Crucially, the islands sit directly above the lucrative Torosa gas field, which dominates the Browse Basin resource held by Woodside and its joint venture partners.

In signing over the field, Federal Industry Minister Ian Macfarlane joked about how the rocks were found.

"Bill [Marmion], you really need a gold pen for all the money you are going to make out of this," he said.

"Congratulations to you and for the diligence of my department, Geoscience Australia, in discovering you were entitled to 65 per cent of this gas.

"This was an oversight by the previous government [which] failed to recognise these rocks, and therefore this area, as being rightfully in the possession of the West Australian Government."

The area, which fast became some of the world's most valuable real estate, was tipped to generate up to $2 billion for state coffers over the life of the project.

'A bit like winning lotto': Bill Marmion

WA Mines and Petroleum Minister Bill Marmion said it was a win for the state, which had been expecting to get a fraction of the 65 per cent handed over.

"It is a bit like winning lotto, $1.5 billion that you didn't expect you were going to get," he said.

"We were seriously looking at getting about 5 per cent of the Torosa field, so it is really great to say we have got 65 per cent, you got 35 per cent.

"Whilst we probably won't get it for five to 10 years, it is something you can look forward to - the Treasurer will be looking forward to it coming into his coffers."

The discovery also gave the state bargaining power to negotiate other benefits from the Browse Joint Venture.

Local jobs and the requirement to comply with the state domestic gas reservation policy were lost when the consortium abandoned onshore processing at James Price Point because of high costs.

It chose floating LNG technology instead, most of which would be built in Korea.

But with the basin's largest field now in state waters, the WA government had the power to impose requirements on the consortium if it wanted its retention leases over the area renewed for floating LNG.

The state managed to secure a supply of domestic gas and a commitment from the consortium to establish local support services in the north-west and Perth.

The joint venture said the signing gave it certainty over the project as it heads towards making a final investment decision in the second half of next year.