The findings, which have been published in a paper called "Bio-enhancement of Coal Bed Methane Resources in the Southern Sydney Basin", centre on crucial geological and geochemical factors that control gas saturation levels and coal permeability - the most important parameters for the economic production of coalbed methane gas.

According to CSIRO petroleum scientist, Dr Mohinudeen Faiz, the coal seams in the Sydney Basin contain large amounts of methane thanks to big quantities of high rank bituminous coal.

He said the study found that the methane was generated from a combination of deep burial during the Cretaceous Period and from shallow bacterial activity during more recent geological history.

Dr Faiz said the high purity methane occurred mainly in the deeper parts of the basin with carbon dioxide concentrations higher up and closer to fracture zones. This level of understanding now allows better judgements to be made of gases in deep coal seams elsewhere.

According to estimates by the New South Wales Department of Mineral Resources, the Sydney Basin may contain up to 750 billion metres of methane resources outside those areas containing national parks, colliery holdings and urban development. Of this, 20-60% is potentially recoverable.

Sydney Gas has moved to put its boot on much of this ground - the company holds five exploration licences and two production leases covering 23,800 square kilometres.

"This study has identified critical factors that can be used to delineate high production fairways having high gas saturation levels and enhanced permeability," Sydney Gas' R&D Manager, Joe Choudhury, said.

"We also demonstrated another first - that these coals with secondary biogenic gas have high methane saturation levels and are more economical to produce than coals lacking secondary biogenic gases."

Sydney Gas shareholders recently approved fund raising solutions needed to fund a 100 well drilling program to access the ready supply with a placement to US and UK investors in early May already raising $5.3 million.

In the three months to March 31 this year the company pulled in just $614,000 in cash from customers while expenses ran at $4.8 million. That compared with $295,000 in receipts in the previous quarter and $3.6 million in costs.

However, the company predicts a future that would put it in the top handful of Australian producers, based on gas-in-place reserves of around 63 trillion cubic feet (TCF) within its acreage.

It says recovery factors of 90% have been seen in some high permeability gas fields in the US. Even at a gas recovery rate of between 30% and 50%. potential gas recovery ranges from 19 TCF to 32 TCF, provided that the geological model is consistent across the Sydney Basin.