State Gas Limited announced that production testing gas from the Rougemont2/3 lateral well ("Rougemont") is flowing at a rate that is approaching being unquestionably economic. It is producing in excess of 350,000 scft/day with the flowrate increasing at between15-20,000 scft/day, despite the top coals of the Bandanna coal measures remaining underwater. If Rougemont gas production continues to increase at this rate it would justify temporarily relocating the relocatable CNG project compression assets from Reid's Dome to Rougemont.

The advantages of such a move would be that the company would produce a positive cashflow from otherwise flared gas whilst preserving the conventional gas at Reid's Dome as a quick response to what should be an increasingly volatile domestic gas market following the closure of the Liddell coal fired power station in April. Whilst such a move may cause a slight delay in the commencement of the CNG project, its gas would still be available for the winter electricity needs following the Liddell closure. The early success of the Rougemont Production Test means the company is evaluating the quickest method by which it can get reserves declared at Rougemont to underwrite the financing of an approximately 20 km pipeline to a connection on the Wallumbilla to Gladstone Pipelines.

The options for a quick reserve certification range from a three to five well pilot scheme to pressure monitoring wells or a combination of both. A decision on the precise next steps to be undertaken this dry season will be made after discussions with the reserve certifier this month.