“The well is located on a well-defined structure that in the oil case could hold 150 million barrels of reserves. All the indicators are positive and I am very optimistic,” chief executive Rick Webber said.

Austral said Douglas-1 would test the seismically-defined Douglas structure and will take about three weeks to drill to a depth of 2000m.

“Primary reservoir targets for the well are the Jurassic aged Alene, Toro and intra Imburu sandstones. In offset locations within the Papuan Fold belt and Foreland Basin, these sandstones provide the reservoir for in excess of 500 million barrels of oil and 10 TCF of gas,” the company said.

“Sandstones developed within the Oligocene aged Sirga Formation are also mapped within closure and constitute a secondary target for the well.”

Austral is operator of the well and holds a 35% stake in Douglas-1, located within PPL 235 in the onshore Papuan Foreland Basin.

Last week, the company posted a $NZ2.4 million ($A2 million) loss for the calendar year, narrowing from a $5.7 million loss in the previous year.

Webber said Austral was in a sound financial position, despite the two losses, and was well placed to pursue its 2006 business objectives.

Webber said plans for the development of the onshore Taranaki Cheal oil field – that last year produced 31,000 bbls of oil, providing $1.8 million of revenue – were well advanced and work would start as soon as approval of joint venture participants had been secured.