Australian oil and gas producer Santos (ASX: STO) gave the approval to develop the $490-million Fletcher Finucane project off the northwest coast of Western Australia (WA).

Located at the Carnarvon Basin, the first production is expected by the second half of 2013. It is expected to yield 14 million barrels of oil in reserves and produce initially 15,000 barrels a day for the first 12 months of operation.

Santos will be responsible for 48 per cent or $236 million of the capital expenditure, while the remaining 52 per cent will be shouldered by joint venture partners Kufpec Australia and JX Nippon Oil and Gas.

The project will be connected to Santos' nearby floating production, storage and offloading facility at Mutineer Exeter.

The company decided to push through with the development of Fletcher Finucane six months after the oil field was discovered, disclosed Santos Chief Executive David Knox.

John Anderson, Santos Vice President in WA and Northern Territory, construction of the project would boost the company's nearby assets, including those at Mutineer Exeter which has a floating production, storage and offloading facility.

He added the new oil production from Fletcher would extend the economic life of Mutineer Exeter by up to four years and give participants of the two projects more time to study other opportunities in the area.

On Monday, Santos increased its stake in the Fletcher Finucane exploration permits by purchasing an interest from Tap Oil for $21.6 million.

Santos is one of Australia's leading gas producers and has been in operation since 1954. it sources natural gas from the remote outback and is into the development of major oil and liquids business in the country.

The company's total production in 2010 hit 49.9 million barrels of oil equivalent. The firm has the largest exploration in Australia in terms of area at 146.800 square kilometers. Santos is one of Australia's top 30 companies based on market capitalisation which stood at $13 billion as of March 2011.

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