PLANS to drill for oil off the NSW coast have been revived because of sky-rocketing world oil prices.
In a move that has outraged green groups, an Australian joint venture has announced it will establish a drilling rig 22km offshore between the Central Coast and Newcastle to look for gas and oil deposits.
One of the firms, Perth-based MEC Resources, has been conducting air surveys of the area since January following a review of geological formations and says there are early indications of petroleum stores at the intended dig site.
"MEC was reviewing new data from an airborne survey conducted east of Newcastle which detected evidence of petroleum seeps on the sea surface,'' it says in a document lodged with the Australian Stock Exchange on Friday.
The only thing delaying the operation is the availability of a suitable sea-drilling rig.
A joint contract led by Australian firm Bounty Oil and MEC Resources is expected to be executed this year.
"A rig is to be secured, in the near future, to fulfil the work commitments,'' MEC said ahead of a June annual meeting.
The target exploration site is part of the massive Sydney basin which stretches inland and includes coal seams from Newcastle to the Illawarra.
The MEC report contains optimistic estimates that undersea reserves could contain one billion barrels of oil and enough gas to meet Sydney's entire needs for the next decade.
MEC has told shareholders the price of oil has prompted renewed interest in the site.
"Based on the present oil price exceeding $US80 per barrel (and) perceived future demand ... hydrocarbon exploration in the area is justified,'' it says.
The project has applied to the State Government for an extension of a licence to explore the site while awaiting the arrival of a drilling rig to Australia.
A spokeswoman for Premier Morris Iemma yesterday confirmed the application had been received.
MEC has told shareholders it expects the application to be approved.
News of the potential drilling close to the NSW coast has outraged green groups.
Greens MP Lee Rhiannon yesterday slammed the idea.
"A world oil shortage is no justification for pushing ahead. We have to adjust to the fact the petroleum products are now in short supply,'' she said.
"The chance of having an oil spill would be considerable and the damage that would do to the tourism industry, the marine industry and fisheries just isn't worth it.
"It would be highly irresponsible for the amount of oil we might be able to produce.''
The companies are confident they will book a drill by November, but the unit could take a further six months or more to arrive.
Initial exploratory digging is expected to take as little as three weeks.
"By pursuing the exploration and drilling of (the reserve), the company is targeting an oil and gas project with potential in the hundreds of millions of dollars,'' the report reads.
MEC is attempting to get shareholder approval for a restructuring of its gas and oil assets to improve access to capital for exploration.
In a document for shareholders, regarding the Sydney basin, it says there are four other large leads in the area, each with significant potential gas recoveries.
"If available estimates were to be realised, (the area) would be on a par with some of the largest gas reserves in the world.
"Should an oil play be established, potential oil resources could be in excess of one billion barrels in place. Oil has been recorded from some 55 locations within the onshore basin.
"The potential reward from a successful drilling program makes this a very attractive exploration opportunity
GBA Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
