UPDATE: Santos Says Oil Found At Australian Finucane South Field

Santos Ltd. (STO.AU) said Wednesday oil production could begin by the end of 2013 at a new discovery and an adjacent find in coastal waters off the northwest coast of Australia, with an investment decision on developing the discoveries expected by the partner companies before the end of this year.

The Australian company said oil has been discovered at Finucane South, about seven kilometers from the Fletcher oil field discovered in 2009 in the Carnarvon Basin. Drilling encountered more than 18 meters of net oil in what is known as the Late Jurassic Angel formation, it said.

Santos said engineering studies on jointly developing Finucane South and Fletcher are advanced and a number of options have been considered, including use of the nearby Santos-operated floating production and storage facility at the Mutineer Exeter field, which would enable first oil output by the end of 2013.

Perth-based Tap Oil Ltd. (TAP.AU), which has a minority interest in the block where the new discovery and Fletcher field are located, separately said early evaluation indicates the discovery could exceed an estimate of 8 million barrels made before drilling. The new well will be suspended after evaluation is completed, it said.

The discovery at Finucane South follows a gas discovery in April at the Zola-1 exploration well in the Carnarvon Basin, in which both Santos and Tap are investors.

"Finucane South-1A makes our exploration success rate for 2011 two out of two following the significant gas discovery at Zola earlier in the year," said Troy Hayden, managing director and chief executive of Tap.

Santos holds a 33.4% interest in WA-191-P, where Finucane South and Fletcher are located. Kufpec Australia has a 33.4% interest, Tokyo-based JX Nippon Oil & Gas Exploration Corp. 25% and Tap the remaining 8.2%.

Santos has a 24.75% interest in Zola, while operator Apache Corp. (APA) holds 30.25% and OMV Australia, JX Nippon and Tap Oil between them the remainder. Apache in April said it was too early to speculate on reserve size at Zola, and a new seismic survey was planned for later in the year.

-By Robb M. Stewart, Dow Jones Newswires; [phone]; [e-mail]