Drilling of a new well, Banjo-1A, will now start using a cable tool rig, which arrived on site yesterday. This rig will drill to a depth of about 100 metres and surface casing will be set. The rotary rig will then move back to the well site early next year to re-commence drilling to the target depth.

Lakes Oil company secretary, Robert Love, told EnergyReview.net that loss of circulation while drilling was “not uncommon."

“It is something that we’ve encountered before in the Gippsland Basin,” he said.

“In this instance, a loss of circulation has occurred over an interval of 71 to 81 metres, due to either a very porous sand or gravel layer or possible caves in the top of the limestone.”

The Banjo-1 well was originally scheduled for drilling in January this year, but rig and crew problems repeatedly caused rescheduling of spudding dates until last Tuesday, December 7.

Banjo-1 will test oil migration and trapping in a newly identified sub-basin and anticlinal structure. This stratigraphic core hole is being drilled to provide stratigraphic and reservoir information regarding the Cunninghame Greensand and the underlying Colquhoun Gravel at this location if they are present, according to operator Lakes Oil.

"It will test the competency of a large anticlinal structure which runs roughly east-west broadside to the coast," Lakes said in last week’s report.

"It will also test the extent of hydrocarbon migration from the spilling, offshore fields, up-dip towards this onshore portion of eastern Gippsland Basin."

Gippsland Offshore Petroleum Limited has farmed into the well and is committed to paying up to $400,000.00 of a two-well program in the Marlo Block in PEP 155 to earn a 51% interest.

Participating interests in the designated area after the farm-in is completed will be: Lakes Oil NL 46% (operator), Gippsland Offshore Petroleum Ltd 51% and Rilo Explorations Pty Ltd 3% (a wholly owned subsidiary of Stellar Resources Limited).