Oil and gas explorer L&M Petroleum says it will start drilling the first three wells in its search for coal seam gas in Southland.
The company is listed on the New Zealand and Australian stock exchanges. It will spend between $NZ1.5 - $NZ2 million on the first stage of the exploration.
L&M says it could reap up to 300 petajoules of fuel.
Chief executive John Bay says L&M plans to drill another five wells this year to help confirm the extent of the coal seam gas potential contained in its Southland permits, and is confident it will find what it's looking for.
He says that if L&M hits the right coal seams, the gas will be extracted and sold in New Zealand within seven years.
Another company, Solid Energy is exploring for coal seam gas in the North Island.