A gas discovery in Southland could be worth several hundred million dollars if early estimates are correct.
Exploration company L & M Petroleum has hit a core of coal seam methane gas in its first well at the Goodwin 1 exploration well drilled near Ohai.
The company's chief executive, John Bay, says the first core came up from the rock fizzing with gas, an exciting development as it is the first well drilled on the western Southland site.
Mr Bay says L & M Petroleum has several more wells to drill before it is possible to accurately gauge the field's commercial potential, but early estimates are that it could be a similar size to the Kupe gas field off Taranaki.
He says the field could be as big as 300 billion cubic metres.
The Petroleum Exploration and Production Association says the methane is likely to be used to power local electricity generation such as boilers at dairy factories.