News: Australian explorer looking at grounds for lawsuit over fracking ban

MELBOURNE, Aug 31 (Reuters) - Lakes Oil (LKO), a junior oil and gas explorer in Australia, is considering the grounds it may have for suing Victoria state, after the government there permanently banned fracking and extended a ban on onshore conventional gas drilling to 2020.

Lakes Oil shares sank as much as 50 percent on Wednesday in their first trading since the fracking ban was announced, and the stock was the fourth most active on the Australian exchange.

The move by the state in the country's southeast means Lakes will not be able to go ahead with two tentative deals lined up in 2014 to supply gas from its Wombat onshore conventional gas field to U.S. giant Dow Chemical Co and Australian food manufacturer Simplot.

"What the government's done is just unbelievable. It's unprecedented," Lakes Oil Chief Executive Roland Sleeman told Reuters in an interview.

Sleeman would not say whether his company would seek compensation from Victoria, but said it was a "really relevant question".

"I invite you to have a look at what has happened elsewhere. The key example is Metgasco in New South Wales - not exactly the same situation - but ultimately it was compensated by government," he said.

New South Wales agreed last year to pay Metgasco (MEL) A$25 million ($19 million) to buy back three exploration licenses after suspending approval for drilling at a promising coal seam gas site due to public protests.

Victoria-focused Lakes was also considering a range of commercial options, Sleeman said, including expanding into South Australia state, which is eager to promote gas development.

Lakes could merge with another company, buy assets that larger players are spinning off, or in an extreme case, fold, he also said.

Lakes Oil has spent at least A$80 million to prove up gas resources on its Victorian acreage, Sleeman said.

($1 = 1.3298 Australian dollars)