Sydney, Jan 10, 2006 (ABN Newswire) - Following recommencement of production testing in the Gloucester Basin (NSW) well, LMG03 in early December, Molopo (ASX: MPO) has recorded a progress production peak of 537,000 standard cubic feet per day (scf/d), which is equivalent to approximately 570GJ/d.

Because the well had not stabilised, pumping rates have been deliberately reduced with the well still producing in excess of 400,000 scf/d. These production rates, if maintained and repeated, are well above the expected minimum threshold for a commercial project.

"Significantly, the results are only of an interim nature as the ultimate peak gas production rate may be higher once the water levels are drawn down and the well stabilised," Molopo's Managing Director, Mr Stephen Mitchell, said today. "Further updates on gas flows will be released when appropriate.

"The above gas flows are very encouraging, and are substantially greater than the 280,000 scf/d flows recorded in the same well when it was first briefly tested in September 2004. That test was interrupted due to pump failure. Both the current test and the 2004 gas rate were recorded apparently before full gas desorption occurred, with the water level being only 80 metres below the surface.

"However, the lowermost target seam in this well occurs at 405 metres, and as gas production typically peaks in a coalbed methane well only after the water level has been drawn down to below the coal seams, the outlook for LMG03 is very sound."

Second Gloucester well being drilled

In addition to the resumption of production testing, the joint venture has commenced drilling a new coalbed methane corehole, LMGC1, which spudded on 4th December. Drilling in LMGC1 is currently at a depth of 258 m. The borehole has intersected several anticipated thin seams and thick tuffaceous intervals marking the Craven Subgroup in Gloucester Coal Measures. Drilling will resume in mid January to intersect and test several thick coals underlying the Craven Subgroup.
LMGC1 is one of two fully cored coalbed methane exploration holes which aim to test the southern and northern continuity of the thick, highly gassy coal seams of the Gloucester Coal Measures in the Stratford CBM Prospect in the Gloucester Basin. The corehole is proposed to be drilled to about 700 metres. It will seek to recover coal cores for gas and coal testing, and be made available for downhole permeability testing.

The Gloucester Basin permit is located approximately 100km north of Newcastle, a very desirable market for gas where premium prices could be expected.

The permit covers an area of 1,050 km2, with over 200km2 of prospective coal measure sequence. The initial focus of the two Joint Venture partners is on a 5km2 area referred to as the Stratford Prospect, which has an estimated 90 petajoules of gas in-place.

Molopo's joint venture partner in the Gloucester Basin project is Lucas Coal Seam Gas Pty Limited (70%), which is also the project's operator. Molopo has recently increased its interest in the permit to 30%.

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