Southern coal seam gas explorer L&M Energy is a step closer to producing electricity from gas production, with its Ohai pilot project site scheduled to begin generation in early May.
For the quarter ended March, L&M successfully completed drilling coal targets.
At present it is installing surface and subsurface production equipment, including a 1MW gas-fired generator.
Pilot production is scheduled to start early next month, L&M managing director Kent Anson said in a statement yesterday. Shares in L&M were up 5.2% on the news, trading about 16c.
L&M has an agreement to sell electricity output from the Ohai coal seam gas project to the Rio Tinto Alcan-owned New Zealand Aluminium Smelter (NZAS).
"Once commissioned mid-year, this generator will sell any electricity generated to NZAS."
Mr Anson said at the end of the quarter L&M had $NZ7.3 million of cash available to undertake its work programmes.
Craigs Investment Partners broker Chris Timms noted L&M was still "flush with cash".
"L&M is nearing the stage of generating cash flows from its activities and getting some runs on the board".
Yesterday, Australian mining giant BHP Billiton said it would like to become a liquefied natural gas (lng) operator in the future, the Australian Financial Review reported.
Mr Timms said there was likely to be "heightened interest" soon in the activities of gas producers, such as L&M.
Coal seam gas can be converted into lng, to make it transportable.
