The report said CSM has continued to grow with domestic gas production increasing 2.3%.
"Coal seam methane production continues to grow strongly," EnergyQuest chief executive Dr Graeme Bethune said.
"It hit a new record of 34.3 petajoules for the March 2008 quarter, making a total of 123.1 petajoules for the 12 months to March," he said.
"This was nearly a quarter (23.8%) of the entire east coast gas production.
"Gas use on the east coast grew strongly in 2007, driven by increased gas use for electricity generation and so far this has continued into 2008."
Conventional gas production decreased 2.1% but the growing CSM compensated for the fall.
The report also said Australian petroleum production slowed in the first three months of 2008 due to sharply lower production of crude oil and natural gas liquids.
Production decreased from 112 million barrels of oil equivalent in the same three-month period last year to 106MMboe.
Oil production also decreased, down 11.7% to 26.6MMbbl in the March quarter, despite the strong performance of BHP Billiton's new Stybarrow oil field offshore Western Australia.
The major oil producing basins - Bonaparte Basin offshore the Northern Territory, Carnarvon Basin offshore Western Australia and the Gippsland Basin offshore Victoria - all experienced a drop in oil production.
However the Cooper Basin, onshore South Australia and Queensland, was an exception, recording a 24.1% growth in production.
The report said the lower production rates reflected a range of causes including more severe cyclone activity, natural field decline and equipment failure.
"The significant drop in Australia's oil production for the first three months of 2008 is extremely disappointing," Dr Bethune said.
"Australian oil production grew last year for the first time since 2000," he said.
"There was widespread industry hope that the growth would continue in 2008, so this isn't a good start."
Liquefied natural gas production experienced a small decline, falling 1.3% to 3.6MMt for the quarter.
The proposed 14 new LNG projects, including the Papua New Guinea project that has recently entered Front End Engineering and Design (FEED) status and four east-coast projects based on CSM are expected to increase production.
The report also found average Australian LNG export prices were $A7.29 per gigajoule for the quarter, significantly below average Japanese LNG import prices of A$11.61 per GJ.
Japanese buyers paid an average of more than $A18 per GJ for LNG from Algeria to meet winter demand.
East coast domestic gas prices were also below export prices ranging between $A1.95 and $A3.55 in the quarter.
EnergyQuest oil and gas production and reserves estimates are compiled from a comprehensive database of company reports and are published in the company's EnergyQuarterly.
