The Melbourne-based company said the 833-square-kilometre permit contained two hydrocarbon discoveries – one in 1987 at the Windermere-1 exploration well, which produced oil on test, and the other at the Port Fairy-1 well, which encountered both oil and gas in 2002.

The neighbouring permit, PEP 150, also contained an oil discovery at the Lindon-1 and 2 wells.

“More generally, there have been numerous hydrocarbon shows and recoveries in this area of the Otway Basin, often in wells that may have failed to intersect valid structural closures due to sparse and poor quality seismic data,” BSOC said.

“These existing oil and gas discoveries demonstrate an active petroleum system with the potential to charge economic accumulations.”

BSOC said it planned to re-evaluate PEP 167’s potential in light of the current pricing and market conditions.

It said the area had good road access and infrastructure, which could allow the company to rapidly and cheaply commercialise any oil discoveries.

The extensive gas pipeline network in the basin also improved the chances of any gas discovery being brought online.

This year the company plans to undertake further geological and geophysical studies, to build on the existing database of seismic and well data.

In 2008 and 2009 it plans to undertake field operations, with principal exploration targets in the Eumeralla Formation sandstones, while secondary potential exists in the underlying Crayfish Subgroup and overlying Sherbrook Group.

BSOC now holds interests in three adjacent Otway Basin permits – PEP 150, 151 and 167.