"Linc Energy has finalised a program for drilling holes in the areas encompassed in EL 3325 and 3326 as a first stage in testing the potential for underground coal gasification," Sapex said.
"This program is expected to commence late in May 2008. The program will be conducted within the area defined by EL 3325 to be followed in EL 3326 at a date yet to be determined."
The permits are in South Australia's St Vincent Basin, which lies between Adelaide and Port Augusta, giving access to strong markets for gas or diesel produced by Linc's use of underground coal gasification (UCG) and gas-to-liquids (GTL) technologies.
Linc claims gasifying the coal underground produces a synthetic gas (syngas) that can either be used as feedstock for electricity production or can be processed through Fischer-Tropsch technology to produce a clean diesel fuel.
The company says it can also strip out carbon dioxide relatively early in the process and store it in coal seams, although this would involve an additional cost and much will depend on the Federal Government's emerging greenhouse gas reduction policies.