Santos has confirmed it will develop the $490 million Fletcher Finucane oil project in the Carnarvon Basin off the northwest coast of Western Australia.

First production was expected in the second half of 2013, Santos said on Friday after announcing its final investment decision on the project.

Its share of capital expenditure on the development will be $236 million, with the remaining costs to be borne by joint venture participants Kufpec Australia and JX Nippon Oil and Gas.

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

Average gross production from Fletcher Finucane would be at 15,000 barrels per day for the first 12 months, Santos said.

Reserves are estimated to be about 14 million barrels.

The decision to go ahead with development came just six months after the discovery of the Finucane South oil field, Santos chief executive David Knox said.

Meanwhile, Santos has increased its holding in exploration permits in the Carnarvon Basin by buying out an interest from Tap Oil for $21.7 million.

Santos will pay cash for Tap Oil’s 8.2 per cent interest in an exploration permit within the Fletcher Finucane development.

The transaction takes Santos’ interest in the Fletcher Finucane project to 48 per cent.