The deal for a half-share will help get Toronto-based NZEC out of a financial hole.
L&M Coal Seam Gas Limited (LMCSG) has announced initial coal seam reserves at its Ohai permit, north of Invercargill.
In a statement, the company said it had booked 173 petajoules (PJ) of 3P gas reserves at the Ohau permit PEP 38220.
Company chief executive Kent Anson said it was investigating a number of contract options for the resource.
He said he would not want to put a figure on the resource, but North Island pricing ranged from $7 to $8 a gigajoule and up to $40 a gigajoule at the retail end.