Eastern Gas Corporation (ASX: EGA) has seen its share price jump sharply on positive news from drilling of the Venus-2H horizontal appraisal well at Project Venus in Queensland's Surat Basin, one of Australia's major coal seam gas producing regions. Gas from the basin supplies Queensland's domestic market and underpins the state's liquefied natural gas export industry, with CSG-fed LNG terminals operating near Gladstone.

Venus-2H has entered the target Macalister Lower coal seam and is continuing to drill toward its planned intersection with the existing Venus-1 vertical wellbore. The approach of drilling a horizontal well from surface to intersect a vertical wellbore in the target seam, known as surface-to-in-seam drilling, is used in coal seam gas development to increase the length of wellbore in contact with the coal.

Since entering the target coal, the well has encountered intervals comprising up to 100% coal cuttings and multiple excellent gas shows, with total gas readings of up to 25.4%. Under the wellsite classification used for the drilling program, gas readings above eight per cent are classified as excellent.

Managing Director David Spring said the gas readings represent hydrocarbons released from coal cuttings during drilling and detected by the rig's surface gas-monitoring equipment. The results confirm high levels of gas saturation within the target coal along the Venus-2H well trajectory. Once drilling has been completed, the company will test for gas flow rates to provide a measure of future well productivity.

"The drilling results to date confirm that Venus-2H has entered the target Macalister Lower coal seam on its planned trajectory toward Venus-1 and its ultimate 1000 metre horizontal section," Mr Spring said.

"We have encountered intervals comprising up to 100% coal cuttings together with multiple gas shows classified as excellent under the wellsite rating system, including total gas readings of up to 25.4%. These observations are encouraging and confirm the presence of high gas saturation within the target coal along the well trajectory. However, they are drilling indications rather than flow test results, and the productivity of the well will be determined through the planned dewatering and flow-testing program.

"Our immediate focus is on safely completing the ranging operations and drilling the final section required to achieve the planned intersection with Venus-1, then completion of our planned 1000m horizontal well path."

Venus-2H is currently at a measured depth of approximately 860 metres and is estimated to be 60 metres from Venus-1. Ranging operations are under way to guide the final approach to the vertical wellbore. Once the Venus-1 intersection has been achieved, drilling will continue through the target coal to complete the planned 1000-metre horizontal section.

The integrated Venus-2H/Venus-1 well system will then be prepared for dewatering and flow testing. The flow-testing program will assess water production, reservoir pressure response, gas desorption, gas flow and the overall productivity of the target coal. In coal seam gas production, water is typically pumped from the coal seam to lower reservoir pressure, allowing gas to desorb from the coal and flow to surface, which is the process the planned dewatering and flow-testing program is designed to evaluate.

EGA was up 23.1% to 16.0 cents, with a market capitalisation of $22.34 million.