Lakes Oil (ASX:LKO) will open higher after submitting an application to drill the onshore Wombat 5 well in Victoria's Gippsland Basin in the new year.
This follows a memorandum of understanding with Sinopec, Asia’s largest refiner, to investigate a possible joint development of Lakes’ permits in the Gippsland Basin.
The application was inspired after Lake's geology team studied recent conventional discoveries both in Australia and overseas; Wombat 5 will also be drilled conventionally, without hydraulic fracturing.
Lakes believes commercial production is possible using traditional methods to recover gas from the weathered zone at the top of the Strzelecki Formation, proven to be present over a wide area in Gippsland.
Particular similarities were noted with the conventionally drilled Longtom offshore gas field in the Bass Strait.
Lakes' intends to restrict the sale of this gas, which will be produced at lower cost than offshore gas, to Victorian and New South Wales customers.
Interestingly, Lake's counts Gina Rinehart’s Hancock Group as a substantial shareholder with a 18.6% equity interest.
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