Under the first stage of the farm-in, Eastern Star said it would earn a 25% stake in the CSM rights of SAPEX’s exploration licences.

The first stage of the farm-in involves drilling three coreholes, one in each of PELs 117, 121, 122.

The second stage – involving drilling and testing a five-well production pilot – would see Eastern Star earn a further 25% stake in the permits.

Eastern Star will take over as operator for both stages.

Eastern Star managing director David Casey said the Arckaringa Basin farm-in represented a strategic expansion of his company’s exploration portfolio.

“The Arckaringa Basin region has significant development potential and gas market opportunities are unfolding rapidly, particularly in association with new or expanding mining activity,” he said.

“While the areas of interest have not previously been explored for coal seam gas, the extent and development of target coals are well understood due to previous coal exploration drilling.”

The three permits cover over 27,000 square kilometres, about one-third of the Arckaringa Basin.

SAPEX managing director Andrew Andrejewskis said having received and considered several farm-in proposals, it was in its best interests to bring in a partner with the necessary expertise.

“SAPEX welcomes the farm-in by ESG as it has the expertise and demonstrated ability to explore for, develop and commercialise CSG resources,” he said.

“The Arckaringa Basin has enormous potential for coal seam gas with previous work clearly demonstrating the presence of large quantities of sub-bituminous Permian-age coal.

According to SAPEX and Eastern Star, the target coals in this area are sub-bituminous and lie within the Early Permian Mt Toondina Formation.

Between five and nine seams are present, with a combined thickness of 20-35m in the areas to be initially targeted. Individual coal seam thicknesses up to 7.3m have been recorded.