AN estimated $10 billion worth of coal-seam methane gas or enough gas to supply Sydney for the next 150 years has been found beneath the Hunter.
The discovery of the untapped resource, which has the potential to generate hundreds of jobs, was announced at the Sydney Gas annual general meeting this week.
The find has exceeded the company's expectation and is seen as one of the most significant Australian gas discoveries in recent years.
It follows 12 months of core hole drilling in the region by Sydney Gas and its partner, AGL Energy.
The company believes 708 billion cubic metres of gas, or 25,000 petajoules, are contained in coal within an area from Paynes Crossing to Scone.
It estimates 10,000 petajoules can potentially be extracted from the area. By comparison, Western Australia's North West shelf contains an estimated 33,000 petajoules of extractable gas.
"We've broken the exploration area into 10-kilometre by 10-kilometre grids and we've looked at the geology in each of those grids," Sydney Gas chief executive Andy Lukas said.
"We've estimated how much gas we expect is in the coal, the quality of the gas and whether there are any faults nearby."
Mr Lukas said the company was aiming to supply 50 per cent of gas to the NSW market beyond 2015.
"The 30-year contract to supply Sydney is about 2000 petajoules," he said.
"On that basis we will certainly be able to supply Sydney and have some left over for power stations and export.
"Having a gas resource so close to the Sydney and Newcastle markets provides an excellent opportunity for the company."
Coded maps indicating the "sweet spots", or the areas believed to contain the richest resources, were presented at the meeting.
The company will establish production pilot plants across the region to demonstrate the viability of the resource.
"Provided the permeability is such that the gas will flow, we would normally expect to get about half out," Mr Lukas said.
"Our first aim is to get 500 petajoules of reserves then do it in 500-petajoule steps."
Gas energy is seen within the energy sector as a transition fuel between coal and renewable energy such as solar.
When burnt, gas produces half the emissions coal produces.