While the gas sand penetrated in the Longtom-3 pilot hole was thinner than expected, Nexus said this has been partially offset by the better than expected gas saturation. The Melbourne-based company said it was also encouraged by initial indications of porosity and permeability in the gas sand.

The gas pay was intersected about 265m deeper than the deepest gas intersection in Longtom-2, just over 1km away.

This result at Longtom-3 has increased the total gross thickness of gas intersected in the Longtom field from 395m to 660m. Nexus said potential also exists for deeper gas, as a gas water contact (GWC) was not observed in the well. The gas was encountered in a series of independent reservoir units.

“The Longtom-3 pilot hole suggests that the Admiral Formation reservoir sands are laterally continuous in the vicinity of the three wells drilled on the Longtom field to date as the sands can be correlated between all three wells,” the company said in a report to the Australian Stock Exchange yesterday afternoon.

The Longtom-3 pilot hole was aimed at locating the deeper gas sands seen in Longtom-2 and to assist in the well path planning of the horizontal production well.

Nexus said the shallower gas bearing sands seen in Longtom-1 and Longtom-2 were not expected to be gas bearing in the Longtom-3 pilot hole because they were expected to be intersected below the GWC at the well location.

“The results of the well to date indicate that amplitude effects derived from seismic (“seismic anomalies”) can be used to determine the quality and distribution of gas filled sands,” the company said.

“The use of seismic anomalies is an important tool for optimally locating the Longtom-3 horizontal well and any future Longtom wells.”

The pilot hole will now be plugged back to allow the horizontal well bore to be drilled laterally through the Longtom gas sands and tested as originally planned.

Managing director Ian Tchacos told the Excellence in Upstream energy conference in Sydney on Tuesday that Nexus aimed to make an investment decsion in the last quarter of this year, and if it approved the project it would plan on producing first gas in the first half of 2008.

The original Longtom discovery well was drilled in the 1980s and flowed gas. Nexus and Apache drilled a second well last year, which encountered gas but failed to flow to the surface.

Apache pulled out after that failure but has the right to buy back in now that Longtom-3 is a successful discovery.