Listed L&M Energy, which last week raised $8.5 million to boost its southern coal-seam gas exploration in the South, plans to have a $2 million pilot production project operational in Ohai by September to measure gas flows.
LME is expected to make a board decision at the end of the month about whether there will be a capital-raising offered to existing shareholders, as opposed to last week's private placement which targeted sophisticated and institutional investors in Australia.
At Ohai, LME expects to drill up to five holes over a two-month period and spend a further three to four months production-testing methane gas flows, managing director John Bay said when contacted yesterday.
He highlighted the cost and timeframes were "conservative" and there were many variables to the testing equation.
Mr Bay said gas raised at Ohai would hopefully be used in operating an on-site generator, and while flaring gas was an industry standard while measuring flows, LME considered it a waste of resource, and emissions of coal seam gas would now also come at a cost under the emissions trading scheme, which came into force 10 days ago.
Following a cashless merger with private sister company Coal Seam Gas in mid-February, LME now has 12 permits covering almost 13,0000sq km for coal-bed methane gas exploration, in Otago, Southland, the West Coast, Taranaki and the Waikato.
Its Ohai and Waiau permits in Southland, 70km northwest of Invercargill, are the most prospective areas of exploration and are estimated to contain 173 petajoules of energy.
This is the second pilot production project for LME, having in 2008 tested gas flows at its Kaitangata tenement, which showed "encouraging results".
While the test flows were not of a commercially viable volume, LME was planning further test drilling soon.
Mr Bay said the company's existing cash-in-hand, less fees involved, meant LME had $8.5 million for exploration during the next year.
