An international energy company is to begin drilling for oil behind the Remarkables mountain range.
London-based Xtract Energy has obtained a five-year permit from the Government, covering more than 10,000 hectares in the Nevis Valley near Queenstown.
It believes hundreds of millions of tonnes of oil shale lie beneath the mountain.
Confirmation was obtained from Xtract's Australian asset manager, Dr John Shirley, after a report appeared in the Queenstown newspaper, Mountain Scene.
An environmental group is critical of the project. Fish & Game Otago says large-scale oil shale removal would be incompatible with the preservation of the untouched valley.
The group's spokesperson, Neall Watson, is dubious the company can restore the valley to its original condition following the mining, and says Fish & Game would be reluctant to support the venture.