In a deal that will be transformative for the Adelaide energy company, it will build a $US16 billion liquefied natural gas plant at Gladstone on the Queensland coast.
Santos's international partners - Malaysia's Petronas, France's Total, and Korea's Kogas - will contribute the rest of the money needed to build the project, which will not be finished until the end of 2015.
Petronas and Kogas have also signed up to buy seven million tonnes of gas per year for 20 years, in deals worth more than $US120 billion.
In a piece of good news for Queensland, which the company admitted paled in comparison to the flood tragedy unfolding in the state, the project will create 6000 jobs at the peak of construction, and 1000 permanent jobs while it is in operation.
Santos chief executive David Knox said the floods would have no effect on the timeline for the project, which is expected to export its first gas early in 2015.
Construction is expected to start by the end of March this year.
"The plant, we expect to gain site access by end of this first quarter to start initial work," Mr Knox said.
While drilling for gas at the company's gas fields had stopped due to the floods, this would restart once the water had receded, and construction of the pipeline connecting the gas fields to the plant would not start until next year.
The project involves the development of coal seam gas resources in the Bowen and Surat Basins in south-east Queensland, construction of a 420km transmission pipeline and two gas export facilities with a combined capacity of 7.8 million tonnes per year on Curtis Island at Gladstone.
Queensland Premier Anna Bligh yesterday welcomed the go-ahead for the project.
"Proceeding now with projects like this will be a tremendous boost to the Queensland economy," she said.
Federal Resources Minister Martin Ferguson said the project would make Australia the world's second-biggest LNG exporter by 2015.
Santos shares increased by 2.2 per cent to $13.45 yesterday.