Sydney, Feb 20, 2006 (ABN Newswire) - Coal seam gas producer, Molopo Australia Limited (ASX: MPO), says new test results give it further confidence a gas field north of Newcastle in New South Wales, will be commercialised.

Molopo announced today that its LMG03 production test well in the Gloucester Basin, 100 kilometres north of Newcastle, had increased its production rate on test to 666,900 standard cubic feet per day (scf/d) over the weekend.

"The well has already demonstrated production capabilities well above the expected minimum threshold for a commercial project," Molopo's Managing Director, Mr Stephen Mitchell, said today.

"The recent production testing has demonstrated that even after temporary delays in pumping, high gas rates are repeatable in LMG03," Mr Mitchell said.

"The Gloucester project clearly has the potential to become a substantial commercial gas field. As previously announced, the Joint Venture partners are currently drilling two new cored CBM wells to extrapolate the resource base and provide guidance on the location of further production test wells expected to be drilled later in the year."

Mr Mitchell said the latest results for LMGO3 remained of an interim nature as production was still increasing. Fluid levels in the well were still high at around 130m when the well was turned off yesterday due to mechanical failure.

"The ultimate peak gas production rate may be higher once the water levels are drawn down and the well stabilised, and we are considering the installation of a new pump for the next stage of production testing there," Mr Mitchell said.

The Gloucester Basin permit is located approximately 100km north of Newcastle, a strong market for gas where Mr Mitchell says, 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 90petajoules of gas in-place.

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

>>> MOLOPO AUSTRALIA LIMITED