Three groups – State-owned Solid Energy, L&M Group, and Macdonald Investments – are leading the way with their investigations in the North and the South Islands.

Others, such as United States private firm Dillon Petroleum, are following in their footsteps, with less advanced work programs.

Coal Bed Methane Limited – a joint venture between Solid Energy and United States independent oil and gas company Resource Development Technology (RDT) – started exploratory work on a Waikato, North Island coalfield in 2005.

Last year CBM Limited started a six-well appraisal campaign over an area that could contain up to 200 petajoules of gas, and it has now artificially stimulated and fractured four of those wells, using water and propants.

Solid Energy general manager for new energy Brett Gamble said he was unable to give definite figures on increasing permeability and gas flows, but results were promising.

“Water flows have improved, the hydrostatic pressure has reduced, and gas flows have improved,” Gamble said.

“The next stage in our appraisal process, which will take 12 months or so, involves further understanding the water and gas flows within the field. But any commercial decisions will depend on how much progress is made and how much information is gained.”

The appraisal wells were drilled into Kupakupa and Renown sub-bituminous coal seams and CBM Limited started dewatering the 400m-thick seams in mid-November, a necessary step before extracting gas.

Solid Energy’s coal seam gas project manager, Tim Moore, says the six linked wells have been equipped as full-scale production wells, with project economics looking favourable if produced flows match those modelled.

The test wells are close to the main Taranaki-Auckland gas pipelines and to Genesis Energy’s dual-fuelled (coal and gas) Huntly power station.

L&M Group chief executive Greg Hogan says subsidiary L&M Coal Seam Gas is making good progress with its CSM investigations

“Overall, we are certainly working hard on ramping up our CSM activities,” he said from Christchurch.

“We need to do some pilot programs and are sourcing the necessary expertise to assist us with this.”

Hogan said his company considered there was potential for commercial quantities of CSM, up to 300PJ, in five seams within the company’s South Island leases.

“Though this industry is still relatively new to this country and much smaller than in Australia, we see different opportunities that need to be worked up and different markets,” he said.

With no South Island gas pipeline networks, reticulating CSM is not feasible, but possible uses included using CSM to fire small local power stations or local industries such as dairy factories or wood-processing plants.

Hogan said his company was progressing with work program obligations that included core sampling and analysis, groundwater surveys, technical studies and mining feasibility studies in all four permits.

L&M has planned pilot programs for the Kaitangata and Hawkdun fields in Otago during 2008-09, while work at Ohai in Southland would involve drilling more wells, with a view to having a pilot program there by 2010.

Meanwhile, Macdonald Investments is continuing its investigations into possible commercial uses of CSM from its mining permit on the South Island’s West Coast.

Last July MIL won New Zealand's first CSM production permit, over an area covering 170sq.km north and southeast of Greymouth.

Its investigations are targeting coal seams 200-1000m deep, assessing the gas content and permeability of the Brunner and Paparoa coal seams, according to project manager Alberto Kamenar.

"We drilled two core holes in the central part of the permit, in an area not previously drilled, late last year," Kamenar said.

“Unfortunately, these wells intersected thin coals and were plugged and abandoned after logging.”

Last month, MIL and joint venture partner Chartwell New Zealand shot about 35km of 2D seismic in the central and northern parts of the permit, to assist with the location of two more core holes to be drilled by mid-2008.

“If thick and gassy coals are encountered with these wells then we will proceed to build a production pilot before the end of the year,” Kamenar said.

The company’s current evaluation has suggested a gas recovery in the order of 175PJ, perhaps enough to run a local 20-50MW power station.

Geologists believe improved technology and New Zealand's significant coal reserves mean CSM could supply up to 10% of the country's energy needs, about 150-170PJ per year, according to Hogan.