Santos Ltd. said Wednesday that it expects to green light an expansion of its gas export joint venture at Gladstone in Queensland state to two production units in mid-2011, continuing the bullish flow of news out of Australia's burgeoning liquefied natural gas sector.

Adelaide-based Santos, however, slightly changed its guidance on when it expects to sanction the first 3.6 million metric ton a year capacity production unit to "mid-2010".

That is a little different from previous guidance of "the first half of 2010" and may indicate the project is progressing a little slower than expected, or that the group wants to give itself more breathing space.

Sanctioning, also known as making a final investment decision, or FID, occurs when a venture decides to start spending money on major construction activities for its project.

After reiterating projections tipping a substantial increase in long-term demand for LNG, Santos Chief Executive David Knox said Wednesday that when a FID is made for the first production train at Gladstone, Santos will put the business case for two trains to its board.

"We will actually ask for the money for the first one, but with the expectation we'll be coming back to the board to ask for the second one certainly within the year, so that Bechtel Group Inc. can build them back-to-back," he said at an investor briefing.

First shipments of LNG from the first train are slated for 2014, so that indicates Santos wants to start producing LNG from the second by 2015.

Santos has signed an offtake agreement with Gladstone LNG joint venture partner Petroliam Nasional Berhard, or Petronas, for 2 million metric tons a year of LNG, with the option for Petronas to go up to 3 million metric tons.

Knox said Santos is currently in negotiations with other potential customers to underpin the remaining capacity for the first train and the full 3.6 million metric ton capacity of the second train.

Santos is still keen to sell an equity stake in the project of up to 9% to a customer, Knox said. It currently owns 60% of the project, with Petronas owning the remaining 40%.

Santos also said Wednesday that production at the Darwin LNG plant, operated by ConocoPhillips, and in which Santos has stake, is expected to cease for up to 35 days in 2010 for works to be performed.

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