With a planned total depth of 1000 metres, the hole is designed to intersect the Killara Coal Measures at 900 metres. The well was at 201m yesterday and Purus has now run and cemented 5/8 inch casing and installed blow out preventers.

Following geophysical logging and data evaluation, the rig will move to the second well site of the four-well program in the Gordon project, Purus said.

Purus, which raised $9 million in an IPO last September, intends to explore and commercialise CBM for the southeastern Australian gas market. It says it has already held initial discussions with natural gas wholesalers, which have shown interest in buying gas from the company.

Purus intends to drill four slim core holes to depths of around 1000m in the Casterton and Warrnambool areas to sample seams in the Killara Coal Measures already identified from detailed research of the region. Petroleum exploration wells drilled over the last few decades have already confirmed the existence of natural gas in the area.

Commercial quantities of CBM could be brought to the market through the extensive network of natural gas pipelines in south-west Victoria, including the recently completed SEA Gas trunk pipeline from Port Campbell to Adelaide, which runs right through the permit areas.

Since forming in 2002, the company has analysed petroleum, seismic, mineral and water data from previous explorations in the areas now covered by its blocks. Purus has now taken up 10,196 square kilometres of tenements and applications stretching along the northern margin of the Otway Basin from Casterton in the west to Colac in the east, reaching down to Warrnambool in the south.

In this acreage, Purus holds 100% of the rights to explore for CBM over 8,782 square kilometers and has a priority interest in exploration licence applications covering the remaining area.

Two of the six project areas identified for potential development, called the Gordon Project and the Hawkesdale Project near Casterton and Warrnambool respectively, are the subject of forthcoming drilling. The key data points influencing this selection were Santos' Gordon-1 petroleum exploration well drilled in 1997 and the much older Hawkesdale-1 well drilled by the Frome-Broken Hill group back in 1969.

Purus is initially concentrating on coals more than 1.5m thick. Logs from Gordon-1 indicated a number of coal seams, one of which was 2.5m thick. Hawkesdale-1 intersected eight seams, most of them less than 1m thick, although one had a thickness of 4.5m.

The four other selected areas – Mocamboro and Digby near Casterton and Stoneyford and Nalangil near Colac – will be looked at more closely next year when Purus hopes to have joint venture partners for the program.

If the initial drilling is successful, Purus plans to establish a trial gas field to determine the commercial viability of gas production through assessment of gas flow rates and other production parameters. Depending on the results, the board then plans to commission a bank feasibility study for the full production and development of one CBM area, which could involve raising additional funds.