Santos Ltd (ASX:STO) $200 million investment plan to drill three wells in the Bay of Bengal has received approval from the government of Bangladesh.

The approval came a month after the British oil and gas firm Cairn Energy decided to divest its minority interest in the Sangu gas field off the Bangladesh coast to Australian partner Santos.

Muhammad Enamul Huq, state minister for power, energy and mineral resources, told Reuters that the company would complete drilling in the three gas structures by April 2012.

Last year, Santos and Cairn conducted the 3D seismic surveys, at a cost of $18 million, in and around the Sangu and on the prospective Magnama exploration site in the sea.

The gas structures where Santos would drill are located over 8,621 square kilometres in the Bay of Bengal.

Cairn earlier said it had discovered gas in all the structures, where drilling has been planned, but did not declare the size of reserve.

Prior to Santos' acquisition, Cairn also obtained Bangladesh government's approval of right to sell gas from new structures to private buyers.

It also signed an amendment to the production sharing contract (PSC) under which the operator would be able to negotiate with buyers besides Petrobangla for sale of gas, a company official said.

Santos will be the first foreign firm allowed to sell gas to private users at market price from all three gas structures.

Santos, after the takeover, has full ownership of offshore Magnama and Hatiya structures under block 16 in the Bay of Bengal.

With Reuters