BEACH Energy's exploration drilling on the Otway Basin near Penola has started.
Work on one of two planned wells started earlier this week with the drilling rig, which had to be transported from the Cooper Basin in Queensland, set up at the site just south of the township.
Beach Energy managing director Reg Nelson said the company was exploring for gas in shale or tight sands between 2.5-4km deep below the surface.
"Gas exploration and production in the SE is not new, with more than 130 wells drilled in the region over the last 150 years," he said.
"Exploration using modern techniques started in the 1960s and led to discoveries of gas fields that were important for the timber and agricultural industries, plus electricity supply in the region at the time."
Shallower gas fields have now been depleted but the mining company believes there are still resources to be found. "We believe that there are still sources of gas, tightly held at greater depths," Mr Nelson said.
"If we are successful in identifying these resources, it would be of vital importance in reinvigorating these industries in this important part of the State."
In September 2013, Beach Energy held public meetings to tell the Penola and Robe communities about its proposed drilling program.
Mr Nelson said Beach recognised the importance of local aquifers in all operational areas and in particular in the SE.
"We take our time building wells, and do so in a way to ensure that when gas flows it does not have any chance of mixing with aquifers," he said.
"Getting our well integrity right is the most important step of establishing a well."
The wells near surface aquifers will be triple cased with cement and steel.
"This will be done in stages during the drilling process, with the first stage set immediately after drilling through the near surface aquifers, well before potential gas targets are encountered," Mr Nelson said.
"Cement is pressure tested to ensure that the cement has bonded with surrounding rock.
"This very robust process ensures well integrity and is carried out well before drilling proceeds to the depths where gas may be located, so that any gas is isolated within the casing."
Mr Nelson assured the public the company took its time with the process to get it right. The drilling of two wells has been approved by the State Government through the Department of Manufacturing, Innovation, Trade Resources and Energy, which is also responsible for regulating the activities.
If Beach Energy finds gas and hydraulic fracturing is required to stimulate the flow of gas, the next phase of work will be the subject of additional community consultation and separate government approvals.