Reuters reports that the agreement for Shell's 26.56% stake in the project will allow Timor-Leste to push for development of the field. The site, which was discovered in 1974, straddles the maritime border between Australia and Timor Leste and disputes between the two countries over the border has delayed development.
"Although we formed different views about the optimal development scenario, we understand the priorities of the Timor-Leste government and wish it well in pursuing its aspirations to develop this important resource for the nation," executive Zoe Yujnovich of Shell Australia said in the statement.
"This sale aligns with our global strategy to reshape Shell into a simpler and more resilient company."
The deal comes after ConocoPhillips last month sold its 30% stake in the project. Remaining partners include Woodside Petroleum and Osaka Gas.
The border issue between Australian and Timor-Leste was settled earlier this year. Timor-Leste wants to develop Greater Sunrise by piping gas to a liquefied natural gas (LNG) plant on its south coast, while the project partners have favoured a plant in Northern Territory capital Darwin.
"Timor-Leste appreciates Shell's willingness to sell its interests in the Greater Sunrise project," special representative Xanana Gusmão of East Timor said in the statement.
"Shell's attitude throughout the negotiations shows that it is ready to consider not only its commercial interests but also the interests of small nations."
The Greater Sunrise partners have argued the Timor option would be unprofitable.
Analysts remain sceptical about prospects of the field being developed within the next 10 years, as the parties still need to negotiate fiscal terms and tolling agreements.
However, if other parties get involved, such as the Chinese and Koreans, with further stake sales, development might go ahead, Reuters reports.
The Sunrise and Troubadour gas fields, together known as Greater Sunrise, hold around 5.1 trillion cubic feet of gas and about 226 million barrels of condensate, a light oil produced in association with natural gas.