The first phase of the program includes 11 wells (of which nine are new), a pipeline and new compressor capacity, with first gas from the wells expected in July this year. The new wells will be progressively brought on stream over a four month period.

The Mungi coal bed methane (CBM) gas field is located in PL94 in the Bowen Basin, and is the closest CBM Production Licence to the Gladstone industrial market.

Under an existing farm-in arrangement with Helm (25%), Molopo will not need to contribute any funds towards the development program outlined today. Oil Company of Australia (OCA) has a 50% stake.

"We are in negotiations with several potential gas purchasers and expect to enter into formal gas sale arrangements later in the year," said Molopo's managing director, Stephen Mitchell.

"While it is too early to predict exact production levels from this first stage, we estimate that Molopo's share of gas will peak at close to 1.5 terajoules per day (TJ/day) by late 2003," Mitchell said.

"Molopo's ultimate target for its share of gas from the Mungi field is to produce 5-6 TJ/day," he said.

Each of the nine new wells have been located so as to optimise reserves and allow a re-estimate of Mungi's reserve status by the end of 2003.

Gas flows from the new wells will be supplemented by the joint venturer's two existing wells, Mungi 2 and Mungi 4.

The development program provides for a 10" diameter pipeline 7.7 km in length to be constructed between Mungi and OCA's processing facilities at Moura.

Molopo and Helm are also acquiring a 5 TJ/day compressor to boost output and to reduce costs for the field's second stage of development.

The first four new wells in the initial phase will be funded under the existing joint venture arrangements (OCA 50%, Molopo 25%, Helm 25%).

OCA will not participate in the following five wells, entitling Molopo and Helm to a half share each of gas production from these additional wells.

Mr Mitchell said OCA had an option exercisable by February next year, to take a 50% interest in these five wells by funding an additional five wells.

"This effectively delivers an initial 11-16 well first stage production scenario for Mungi," Mr Mitchell said.

According to an independent reserve report produced by Netherland Sewell & Associates, the Mungi field currently has total reserves of 56 PJ - of which 26 PJ are in the 2P (Proven & Probable) category. Joint Venture estimates suggest the Mungi field could contain 162 Petajoules (PJ) of recoverable gas.