Hunter-Bulga Gas Action Group spokesman Graeme Gibson said the potentially explosive zone was 300 metres from Broke Primary School, tennis courts and a recreation area and 200 metres from the closest home.

"Representatives of the company using the wells haven't spoken to residents about the extent of the explosive risk and some residents believe any risk is too great to justify the wells," Mr Gibson said.

Sydney Gas general manager Mark Harper dismissed the concern as an overreaction.

"The risk of explosion is absolutely negligible and the signs are simply a legal requirement to identify the nature of the installation," Mr Harper said.

"There are no leaks at the wells, the gas will be under little more pressure than a car tyre and the explosive danger would be less than the local petrol station.

"Methane is also passed from the back passages of animals and humans and although I haven't tested it, I'd say there is more methane gas coming from cows in the next paddock, or even leaking from the children in the school playground, than coming from our wells."

Mr Gibson said residents were concerned about the potential for gas to leak from ground fractures associated with the wells and the visual impact of drilling on property values and wine-related tourism.

Mr Harper said his company had just bought another property in Putty Road, Millbrodale, on which three test wells would be drilled as part of a program that would consist of nine test wells in the Broke-Bulga area.