Eastern Star told the market yesterday that it had signed an agreement with AJ Lucas subsidiary McDermott Drilling regarding the Schramm TXD Rotadrill 180 drilling rig.

Under the three-year contract, Eastern Star will have exclusive access to the new build rig, which has state-of-the-art pipe handling equipment.

The rig is sized to accommodate all of the company’s proposed activities in the PEL 238 permit, including drilling multi-lateral wells with up to 1000m in-seam.

Eastern Star managing director David Casey said the rig would be primarily used for drilling CSM exploration and production wells in the PEL 238, but may also be used further afield in other areas under investigation

“Dedicated access to the Schramm 180 drilling rig will allow exploration activity within PEL 238 to be expedited,” Casey said.

“In addition to near-term exploration drilling, the rig will be used for drilling multiple gas production wells to be brought online progressively as customer offtakes ramp-up.”

Casey added that Eastern Star was planning a “substantial” exploration drilling program in PEL 238 in 2008.

Additional pilot production projects – involving either fracture-stimulated vertical wells or multi-lateral wells – will be completed to increase the independently verified coal seam gas reserves of the area.

This would underwrite requirements for gas supply under potential gas sales arrangements with major electricity generators such as Babcock & Brown.

Eastern Star is operator and holds 65% of the Gunnedah Basin gas project joint venture, in partnership with Gastar Exploration, which has the remaining 35%.

The project area is within PEL 238, which covers 9100 square kilometres, near Narrabri in New South Wales.

According to Eastern Star, the permit contains one of the largest onshore natural gas accumulations in Australia, totalling 17 trillion cubic feet of gas-in-place.

The PEL also contains the 265sq.km Bohena project area, which contains up to 3.5Tcf of gas-in-place and is undergoing production testing at the Bibblewindi and Bohena production pilots.

“On the basis of the production pilots, which represent less than one percent of the total permit area underlain by coal, 2P gas reserves totalling 59 Petajoules – of which 21 PJ are classified as 1P reserves – have been independently certified,” Eastern Star said.