The Melbourne-based midcap said the pipeline installation vessel will arrive at the project in March, with all activities scheduled to finish before May when the Longtom-4 well is due to spud.

Nexus reiterated that Longtom-4 was not required for first gas from the field, as the earlier Longtom-3 well can provide the entire Santos’ contracted flow-rate of 68 terajoules per day.

Appraisal of the Longtom field would test the field’s upside potential, or the rig slot may be used to test the Longtom Upper prospect, which has the potential to hold 200 petajouls of gas.

The prospect was identified using the same seismic amplitude techniques that accurately located gas in earlier appraisal work.

A well testing upper prospect would be drilled after the Longtom-4 development well is completed in mid 2008.

Nexus managing director Ian Tchacos said this drilling strategy would be a “very cost effective” way of boosting its marketable reserves base and future cash flows.

“The best place to find gas is where you have already found it - the upside potential at Longtom and the Longtom Upper prospect provides Nexus with a very exciting opportunity in light of strengthening gas prices and increasing demand for gas in eastern Australia,” he said.

“With 100 percent of the project we have the ability to leverage from our Longtom development infrastructure immediately after its creation and have the potential to build a very significant portfolio of gas connected to existing infrastructure.”

International advisory firm Gaffney Cline and Associates estimates the Longtom project, which is forecast to deliver about $A70 million of operating cash flow per year, contains more than 800PJ of possible contingent resources.

As well as the 350PJ of contracted gas, Nexus will also produce 4 million barrels of condensate from the project.

Now that Nexus has been granted a production licence for the development, Santos has until the end of November to decide whether or not to buy a 35% stake in Longtom for $70 million.