It is expected that Panax Geothermal's drilling rig at its Salamander-1 geothermal well in the Otway Basin near Penola will hit steam in just two weeks.
Panax Geothermal managing director Bertus de Graaf together with federal Resources Minister Martin Ferguson, officially opened the Salamander-1 geothermal well on Friday.
Dr de Graaf said the company was on target to reach the target depth of 4,000 metres this month, which means geothermal energy is well on its way to becoming a reality in Australia.
"Panax is now undoubtedly at the forefront of the geothermal market in Australia and is the closest to achieving commercialisation of base load geothermal energy," he said.
The company plans to have a demonstration power plant in operation by 2011, subject to the results of Salamander-1.
Panax's geothermal exploration has been bolstered by a $7 million federal government grant.
The well's proximity to the National Electricity Market Management Company grid (NEMMCO) also means the project could power thousands of homes without needing new grid connections.
The Penola Project is the first geothermal well in Australia to test a Hot Sedimentary Aquifer (HSA), which extracts hot water from an existing aquifer or HSA reservoir.
Panax has a measured geothermal resource of 11,000 petajoules at the Penola Project which has the capacity to deliver hundreds of megawatts of zero emission power.
The project covers an area of 493 square kilometres and is part of Panax's larger Limestone Coast Geothermal Project, which covers a total area of 3,127 square kilometres.
Panax's focus is on exploring existing reservoirs containing hot geothermal fluids, which has fewer risks than hot fractured rock geothermal projects and a much shorter development time.
Source: AAP NewsWire