But the company said pumping rates have been deliberately reduced to 400,000 cubic feet per day, because the well had not stabilized.

Managing director Stephen Mitchell said if maintained and repeated, these production rates were well above the expected minimum threshold for a commercial project.

“Significantly, the results are only of an interim nature as the ultimate peak gas production rate may be higher once the water levels are drawn down and the well stabilised,” Mitchell said.

“The above gas flows are very encouraging, and are substantially greater than the 280,000 scf/d flows recorded in the same well when it was first briefly tested in September 2004. That test was interrupted due to pump failure. Both the current test and the 2004 gas rate were recorded apparently before full gas desorption occurred, with the water level being only 80 metres below the surface.”

“However, the lowermost target seam in this well occurs at 405 metres, and as gas production typically peaks in a coalbed methane well only after the water level has been drawn down to below the coal seams, the outlook for LMG03 is very sound.”

In addition to the resumption of production testing, the joint venture has started drilling a new coalbed methane corehole, LMGC1, which spudded on December 4, and is currently at a depth of 258 metres.

The borehole has intersected several anticipated thin seams and thick tuffaceous intervals in the Craven Subgroup in Gloucester Coal Measures, Molopo said. Drilling will resume in mid January to intersect and test several thick coals underlying the Craven Subgroup.

LMGC1 is one of two fully cored coalbed methane exploration holes, which aim to test the southern and northern continuity of the thick, highly gassy coal seams of the Gloucester Coal Measures in the Stratford CBM Prospect in the Gloucester Basin.

With a planned drilling depth of about 700 metres, the corehole will seek to recover coal cores for gas and coal testing, and be made available for downhole permeability testing.

The Gloucester Basin permit is about 100km north of Newcastle - a very desirable market for gas with premium prices, the company said.

The permit covers an area of 1,050 sqkm, with over 200 sqkm of prospective coal measure sequence. The initial focus of the two joint venture partners, Molopo (30%) and Lucas Coal Seam Gas (operator – 70%), is on a 5 sqkm area referred to as the Stratford Prospect, which has an estimated 90 petajoules of gas in-place.