“The well has already demonstrated production capabilities well above the expected minimum threshold for a commercial project,” managing director Stephen Mitchell said today.

“The recent production testing has demonstrated that even after temporary delays in pumping, high gas rates are repeatable in LMG03. The Gloucester project clearly has the potential to become a substantial commercial gas field.”

The joint venture partners are currently drilling two new cored CBM wells to extrapolate the resource base and provide guidance on the location of further production test wells expected to be drilled later in the year.

The latest results for LMGO3 remained of an interim nature as production was still increasing, according to Mitchell. Fluid levels in the well were still high at around 130m when the well was turned off yesterday due to mechanical failure.

“The ultimate peak gas production rate may be higher once the water levels are drawn down and the well stabilised, and we are considering the installation of a new pump for the next stage of production testing there,” he said.

The Gloucester Basin permit is about 100km north of Newcastle, a strong market for gas where premium prices could be expected, according to Mitchell.

The permit covers an area of 1050 square kilometres, with over 200 sq.km of prospective coal measure sequence. The initial focus of the joint venture partners is on a 5sq.km area referred to as the Stratford Prospect, which has an estimated 90 petajoules of gas in-place.

Molopo’s joint venture partner in the Gloucester project is Lucas Coal Seam Gas Pty Ltd (70%), which is also the project’s operator. Molopo has recently increased its interest in the permit to 30%.