Last month, L&M announced it was taking a 32.5% stake in licence PEP 38521, an area between the towns of Greymouth and Hokitika, by funding 65% of the cost of drilling a shallow well to test the Fireball Creek prospect.

Now it has applied to Crown Minerals for a 646.4 square kilometre block, to the southeast and south of PEP 38521, together with private Australian company Twinza Oil, headed by Clough Engineering boss Bill Clough, and private New Zealand company McKenzie Petroleum.

"We believe some of the trends we are working on in PEP 38521 extend into the acreage we have now applied for," L&M managing director and chief executive John Bay told PetroleumNews.net from Wellington.

"We hope the drilling activity we have planned for 38521 in 2008 will confirm this view and that this will lead to additional drilling."

If granted this new permit, L&M's first year would involve reviewing existing data and probably incorporating the results of 38521 drilling into an overall work program covering both licences, Bay added.

He said L&M and its PEP 38521 partners hoped to spud the wildcat Fireball Creek-1 well in late January in the same area as two wells, SFL-0 and SFL-1, drilled in the 1940s that suffered blowouts, flowing uncontrolled gas to surface.

L&M believed the Fireball Creek area was gas-prone, as compared to oil prone, and that success there presented the opportunity for L&M, which listed on the ASX and NZX last January, to establish early production, Bay said.

This West Coast acreage could contain commercial quantities of shallow biogenic gas, as opposed to thermogenic gas, and as such had some similarities with coal seam methane operations in onshore Queensland, Bay told PNN.

The partners in the proposed new block are: L&M Petroleum (operator, 40%), Twinza Oil (40%) and McKenzie Petroleum (20%).

The PEP 38521 participants are: L&M (operator, 32.5%), Pacrim Energy (35%), McKenzie Petroleum (8.125%), EF Durkee and Associates (8.125%), GRDC (8.125%), and Labrador Energy (8.125%).