"The recent gas discoveries in NT/P68 significantly enhance the company's position in the development of its own hydrocarbon resources and gas supply options," managing director Chris Hart said in a release.

"The company believes that the permit offers considerable scope for the confirmation of commercial gas accumulations that may support the future gas demands of the proposed Tassie Shoal LNG and methanol projects.

"The company is preparing to farm-out an interest in NT/P68 to fund further appraisal drilling of the Heron and Blackwood discoveries."

Completed by MEO and upstream partner Petrofrac in early March, Blackwood-1 was a fairly straightforward gas discovery, but the preceding well, Heron-2, was much more complicated.

Blackwood-1 confirmed 49m of gross Plover formation gas-bearing sands to a gas-water contact at 3188m subsea. It holds close to 2.5 trillion cubic feet of gas - of which 1.7Tcf is likely to be recoverable - but 25-30% of this gas is carbon dioxide, which is why MEO has chosen to develop the field for methanol.

MEO said Heron-2, in which gas was found but failed to flow to surface, merited further study.

"The joint venture continues to review the Heron-2 well results, 3D seismic and inversion data to determine the reasons for the lack of permeability through the Darwin formation at this specific well location," Hart said.

"These may include damage to the fractured reservoir from overbalanced

drilling muds, subsequent acid washing, the 9⅝-inch casing/cementing activity or that the well was not optimally located to test the best fracture development."

MEO said it was still assessing the well results and the Epenarra and Heron North and South structures, and it believed that confirmation of a significant Late Jurassic section in Heron-2 may have upgraded the potential for wet gas.

The company is now moving to acquire further seismic in the permit.

The PGS Australia seismic acquisition vessel M/V Orient Explorer began acquiring 380 square kilometres of new 3D data over the Blackwood discovery and part of the Blackwood East structure yesterday. 3D acquisition is planned to be completed in about 25 days.

"The 3D seismic data acquisition and subsequent processing is designed to improve depth conversion and mapping of the Greater Blackwood feature and enable optimum location picks for subsequent appraisal drilling," Hart said.

The company plans to drill Heron-3 and Blackwood -2 later this year.

MEO and its downstream partner, Air Products and Chemicals, aim to develop the permit's carbon dioxide-rich gas for methanol, which benefits from feedstock with a high CO2 content.

However, if suitable gas can be found in the permit, the partners will also move to develop an LNG plant. Approvals for both the methanol and LNG projects are already in place.

"The current commodity prices for LNG and methanol continue to remain at record prices, which results in robust economics for the proposed LNG and methanol production projects," Hart said.