The gas sale coincides with the joint venture partner's completion of the development wells and pipeline that make up the bulk of the $10 million first stage development of the Mungi gas field in the Bowen Basin.

The first stage involved the drilling of eleven development wells which will now be placed on line progressively over coming weeks and which are expected to reach stabilised production levels within the next three to five months.

"Under the binding Term Sheet, Molopo will sell into the Origin group our anticipated share of gas from the Stage 1 wells, estimated to peak at around 1.5 terrajoules/day," said Molopo's managing director, Stephen Mitchell.

"This development program and sale agreement has advanced Molopo from explorer to producer status, provides a very solid foundation for building a CBM gas business and enhances the company's market presence in negotiating further long-term, quality sales contracts," he said.

The eleven development wells represent about 12% of the currently estimated gas potential of the Mungi project whose partners include Oil Company of Australia (Moura) (50%), Molopo (25%) and Helm Energy-Australia LLC (25%).

"This first batch of eleven wells has been located so as to optimise reserves and allow a re-estimate of Mungi's reserve status early in 2004," Mitchell said.

"The joint venture partners will consider the Stage 2 program for Mungi once performance results from this first stage are available, most likely in early 2004.

"Molopo and Helm are also acquiring a compressor which will provide capacity to process up to 6 TJ/day of gas. This is nearly twice Molopo and Helm's expected total share of production from the Stage 1 wells and should therefore reduce costs for the second stage development of the Mungi field."

As part of the field expansion, the Joint Venture has completed the installation of a 7.7km 10" diameter gas pipeline connecting the Mungi field to Oil Company of Australia's (OCA) processing facility at Moura.

Joint Venture estimates suggest the Mungi field could contain 162 petajoules of recoverable gas.