Australia has struck a bonanza with the discovery of an enormous reservoir of zero-emission coal seam gas, 100km east of the outback town of Cloncurry.

The discovery of the clean energy reserves in the new Millungera Basin by a Queensland government survey team comes just days after Canberra increased the pressure to embrace lower-emissions fuels by releasing its carbon trading green paper.

The geothermal energy find also comes amid jockeying by local and international companies, such as BG Group and Shell, for a foothold in Queensland's booming coal seam gas sector.

Premier Anna Bligh said the Millungera Basin discovery - which is 300km long and up to 50km wide - was "one of the most exciting resource finds this century'', which could hold clean energy sources for enough low emissions power for the entire northwest region of the state.

"Other rocks of this age in other basins have significant coal seam gas and water resources, and the granites uncovered signal the potential for new sources of geothermal energy that have the potential to generate one-fifth of Australia's total electricity needs over the next 25 years without producing any carbon dioxide emissions,'' Ms Bligh said.

Geothermal - or "hot rock'' - energy pushes cold water from the surface over heat captured in the earth before harnessing the resulting high-pressure steam to drive electricity turbines.

Experts have estimated that Australia could draw nearly 7 per cent of its electricity from hot rock power stations by 2030 after Geoscience Australia's analysis revealed the country's geothermal energy source to be about 1.2 billion petajoules - far eclipsing our 140,000 PJ of total proven and probable gas reserves.

Geologists discovered the new basin, which is believed to be up to 540 million years old, underneath the younger Carpentaria Basin. Further surveys will be conducted to find out the size, shape and depth of the basin in addition to drilling to assess the geothermal potential of the site.
The Government will soon decide which blocks of land will be released for tender for geothermal and gas exploration.

Likely bidders for the geothermal exploration permits include Western Australia's Torrens, Victoria's Green Earth, South Australia's Petratherm and Brisbane-based Geodynamics.

Geodynamics, one of the most advanced geothermal companies in Australia, is working to harness geothermal energy from hot fractured granites deep beneath the Cooper Basin oil and gas fields, near Innaminka in the far north of South Australia.

Before the discovery of the new Queensland reservoir, South Australia had been the centre of Australia's geothermal activity, but a key reservation about the success of geothermal energy in Australia to date has been the fact that the Cooper Basin resource was so far from the major load centres along the coast - a claim that Geodynamics officials have disputed.

Queensland Mines and Energy Minister Geoff Wilson said any significant mineral or energy resource discovery in the region would be a huge benefit to the North West Mineral Province and to nearby Cloncurry and Julia Creek.

Swiss mining giant Xstrata has flagged its intention to acquire new operations in the Mt Isa region as part of its plan to double its copper business over the next five years.Other companies such as Exco Resources and Cudeco also have operations in the region.