Orders for long-lead items such as pipeline, compressors and LNG plant components will now be placed.
Santos chief executive officer David Knox said the approval came at a very difficult time for Queensland as the state grapples with the worst floods it has faced since 1893.
However, Queensland Premier Anna Bligh took a positive view of the approval, saying proceeding with projects like GLNG would boost the state's economy as it recovered from the impact of the floods.
GLNG includes development of CSG resources in the Bowen and Surat Basins in southeast Queensland, construction of a 420 kilometre gas transmission pipeline from the fields to Gladstone and two LNG trains with combined nameplate capacity of 7.8 million tonnes per annum on Curtis Island.
Proved and probable reserves for the project stood at 5005 petajoules at the end of last year, though independent assessors Netherland, Sewell & Associates expect 2P reserves to mature at 9848PJ.
First LNG exports are expected to start in 2015 with binding sales agreements with project partners Petronas and Korea Gas for a total of 7MMtpa of LNG. This is expected to be worth more than $US120 billion over the term of the contracts.
"Already Australia's largest domestic gas producer, GLNG confirms Santos as a major energy supplier to the growing economies of Asia," Knox said.
"The commitment we are making today delivers on the strategic vision to transform Santos into a significant exporter of LNG."
Federal Resources Minister Martin Ferguson welcomed the announcement, saying there would be both immediate and long-term benefits to the project.
"This project and economic development more generally is important in underpinning the skills, tax revenue, wealth and capacity to respond and re-build in the aftermath of the current flood crisis in Queensland."
GLNG will create 5000 jobs in construction in addition to 1000 permanent jobs in production. It is expected that 1500 jobs will be created in the first half of 2011.
Partners in the project are operator Santos (30%), Petronas (27.5%), Total (27.5%) and Kogas (15%).
