Senex Energy (ASX: SXY) has resumed exploration of its Queensland coal seam gas acreage with the spudding of the Kato-2 exploration well in ATP 593P, Surat Basin.
The second well in a 2 well program, Kato-2 will investigate the CSG potential of the Walloon coal measures.
It is also an extension of work already undertaken by the joint venture in adjacent permit ATP 771P where almost 200 petajoules of proved, probable and possible reserves have been independently certified.
Discoveries in the region have the potential to be feed the coal seam gas to liquefied natural gas projects currently under construction in Gladstone.
While these projects have sufficient gas resources to commit to their construction, further resources would be needed for expansions in either capacity or life.
Domestic gas prices are also trending up towards A$6 to A$9 per gigajoule range from current prices of about A$3 per gigajoule.
Kato-1 was spudded on 23 November and intersected 9.8 metres of net coal in the Juandah and Taroom Coal Measures as well as 7.6 metres of net gas bearing shale, exceeding pre-drill expectations.
Preliminary results from 4 successful drill stem tests also indicated excellent permeability.
Desorption testing on the Kato-1 cores is currently underway and final results are expected at the end of the March quarter.
Kato-1 and 2 are located in the north western region of the Queensland Surat Basin, about 38 kilometres south of Injune.
Senex Energy holds a 45% interest in ATP 593P and ATP 771P and is operator of the joint venture, with the remaining 55% interest held by Bow Energy.