ESG also have the Bohena gasfield nearby, lying 30km south of Narrabri, which it is keen to prove up. It recently completed a seismic survey, which it said successfully delineated the extent of the field. The company hopes to begin appraisal drilling in the third quarter after further data processing work.

A former exploration partner found the Bohena gasfield when pursuing coal bed methane opportunities in the permit, and as a result ESG now hold portions of the conventional oil and gas rights to PEL 238 while the ex-partners are free to continue CBM exploration.

The US-based former exploration partner had gone into Chapter 11 financial difficulties in their homeland, defaulted on work commitments and had their equities frozen until a recent settlement. ESG had meanwhile listed on the Australian Stock Exchange during this exhaustive process with what acreage it had, with the equities in dispute unable to be vendored into the company, and were being maintained by the original partners of Morton, King and Battersby.

Now the dispute with the defaulting partner has been resolved and the final equities determined, the independent directors have appointed a consultant to place a value on the remaining equity with a view to acquiring the balance (approximately 61%) for a non-cash offer from the founding trio. ESG will then hold 82% of the permit.

A nearby project that ESG are keeping their eye on is a proposed 60 million litre ethanol plant. Energy is a major component (around 40%) of ethanol production costs, and with plentiful cheap gas from the Coonarah gasfields and Federal Government incentives for ‘green fuel’, Narrabri has become an attractive location for the project proponents. Morton said he was hopeful of being able to make an announcement in the near future.

In their own right, ESG are targeting coal bed methane although concentrating their search on former acreage belonging to CRA – stretching from the outer suburbs of Melbourne to Bacchus Marsh.

Morton said CRA’s studies over the area outlined a resource in excess of 12 billion tonnes of coal and said with the gaseous nature of those particular brown coals, it could equate to between 200 and 500 petajoules of in place gas.

ESG have drilled some core holes to verify the CRA work, and plan to kick off a five well pilot program in June with a price tag of around $600,000 for the program and production testing. “It is a very cheap exercise to target gas in a prospect this close to a major market,” said Morton.

He said initial indications were that the coals were gassy and being brown coal they inherently possess high permeability (or the ability to flow gas and water) that has plagued some of the players targeting black coal.

A dewatering period of several months would probably be necessary to determine whether the wells are capable of sustained commercial gas production rates.

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