March 17 (Reuters) - ExxonMobil's XOM.N Australian unit said on Monday that its Gippsland Basin joint venture with Woodside Energy WDS.AX has approved its final investment decision to develop the Turrum Phase 3 project, targeting underdeveloped gas resources.

The approval is for the A$350 million ($221.31 million) project, which aims to drill five new wells in the Turrum and North Turrum gas fields.

Earlier this year, Australia's competition regulator flagged that the east coast could face gas shortage supply from 2027, potentially leading to gas imports. The shortfall is expected due to structural decline and uncertainty surrounding future investments.

"While depletion of the Gippsland Basin is inevitable, projects such as Turrum will ensure Bass Strait continues to produce gas for the domestic market past 2030," said Simon Younger, Chair of ExxonMobil Australia in an emailed response to Reuters.

The Gippsland Basin joint venture is a 50-50 joint venture between Esso Australia Resources and Woodside Energy (Bass Strait), and operated by Esso Australia.

"The Turrum Phase 3 project, and the recently approved Kipper 1B project, will unlock additional gas that is needed to avoid future shortfalls," said Liz Westcott, Woodside's executive vice president and chief operating officer for its Australian operations in a separate statement.

"Every molecule of gas Woodside supplies from the Bass Strait fields is sold into the Australian domestic market for local manufacturers, power generators and homes."

($1 = 1.5815 Australian dollars)

(Reporting by Shivangi Lahiri in Bengaluru; Additional reporting by Aaditya Govind Rao in Bengaluru and Christine Chen in Sydney; Editing by Sherry Jacob-Phillips)

((Shivangi.Lahiri@thomsonreuters.com;))