The company holds exploration licence 458 that covers about 2000square-kilometres, taking in the city of Newcastle, surrounding suburbs and much of Port Stephens.

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It is planning a pilot program of two vertical and two lateral well tests at Fullerton Cove, where it has access agreements with landowners.

The Tomago sandbeds, which provide about 20per cent of the Lower Hunter’s drinking water, lie to the north.

In a recent operations update, Dart described the exploration licence area as ‘‘a priority as Dart Energy believes the resource can be matured rapidly’’.

‘‘Further, given the proximity of infrastructure and potential gas markets there are a number of viable near-term commercialisation options for that resource.’’

In a statement, Dart chief executive Robbert de Weijer said surface and ground water monitoring would take place before the pilot program began.

‘‘The wells would be lined and double cased with steel and cement to fully protect the upper aquifer,’’ he said.

The company was working on an environmental assessment, and would need permission from the state government.

It was not planning to use the process of hydraulic fracturing or ‘‘fracking’’ to force the gas to the surface, and would be ‘‘fully transparent’’ about its plans.

At a recent briefing for Newcastle city councillors, the company said it was talking to government agencies, including the Office of Water.