The six recipient companies are Hot Rock Ltd, Karoon Gas Australia, Geogen Victoria, Torrens Energy, Proactive Energy Developments Ltd and Greenearth Energy.

However, Karoon said it had decided against accepting permit GEP 10 after reassessing its current activities.

“Karoon Gas wishes the eventual holder of this permit every success in producing viable geothermal power,” the company said.

Elsewhere, Greenearth – an affiliate of Lakes Oil and Victoria Petroleum – announced it would accept its two new permits, GEP 12 and GEP 13, which are prospective for conventional geothermal energy and encompass the entire Latrobe Valley region.

Lakes chairman Robert Annells said his company had “long been aware” of geothermal activity in the region through its petroleum-related activity in the onshore Gippsland Basin.

“Greenearth will now be in a position to capitalise on this knowledge and to build on it,” he said.

“When Lakes Oil drilled the Trifon-2 well in 2004, hot saline water was encountered at 2200m, which flowed to surface at about 90C.”

Annells said Greenearth was investigating technology that could generate power at similar temperatures using a “binary plant”. He said further testing was needed to see whether adequate volumes could be produced.

The exploration permits were issued as part of a legal framework established under the Geothermal Energy Resources Act introduced in 2005.

The permits, the first to be issued in the state, grant exploration rights to an area spanning 80,000 sq km across Victoria's southern region including Melbourne's surrounds.

The Victorian government's target for reducing greenhouse emissions is a 60 per cent cut by 2050. Another target of a 10 per cent cut by 2016 is contained in the Victorian Renewable Energy Target scheme.