Oil and gas producer Santos Ltd (ASX:STO) is reportedly planning to launch a $2 billion rights issue to help fund its Gladstone LNG project in Queensland.

The Australian newspaper understands that Santos, working with JPMorgan, is well advanced in its plans to raise the funds as soon as it completes gas and equity stake sales with Korea Gas Corp and China’s Sinopec.

Just last week Santos said it was prepared to sell up to 15 per cent of the Gladstone LNG project and was in talks with several buyers from Asia over gas deals and equity stake sales.

Santos holds a 60 per cent stake in the Gladstone LNG project with Malaysia’s Petronas holding the remaining interest in the project.

A final investment decision expected by the end of this year. Santos booked a profit of $434 million for the 12 months to December 2009.