The company has successfully converted lignite into clean-burning natural gas after drilling six wells in southern Sumatra in Indonesia.

Next Fuel said it was encouraged by the positive results of the test, with the wells producing newly created biogenic methane gas at a measurable rate within six weeks of drilling.

Meanwhile, the company said it had entered into a development and licensing agreement with its strategic partner, a privately owned company in Indonesia.

The ten year agreement grants the partner rights to use Next Fuel’s CTG technology within the license territory in southern Sumatra.

Next Fuel will receive a 10% gross royalty on gas produced from all wells drilled by the partner in the license territory, based upon gas prices that are indexed to the local market in Sumatra.

Next Fuel chief executive officer Bob Craig said the outcome of the CTG pilot test was in line with the company’s expectations.

“Results from the Indonesian pilot project met our expectations and those of our partner in Indonesia, and the execution of a comprehensive development and licensing agreement represents the achievement of an important milestone in our quest to commercialize our CTG technology on a global scale,” he said.

In addition, Next Fuel has also finalised a pilot test project in Inner Mongolia, China, with its partner Future Fuel.

As with the Indonesian pilot project, multiple wells were drilled and completed into a virgin lignite coal seam with no prior gas reserves or production.

“We are very pleased to report that newly-generated biogenic methane gas was detected in the wells in China within three weeks of nutrient injections,” Craig added.

Next Fuel will kick off full-scale commercial operation in Inner Mongolia during the second quarter of 2012.