Specialist petroleum explorer Bass Strait Oil will erect a rig between Codrington and Bessiebelle later this month to determine whether fossil fuel can be commercially extracted.

The company has conducted extensive research during the past few years to determine whether a thwarted 1987 oil discovery in farmland 50 kilometres west of Warrnambool could be accessed 25 years on.

Bass Strait Oil believes more than three million barrels of oil is located beneath Codrington’s pastoral acres, one million barrels of which could be brought to the surface.

If the operation is successful, the oil rig will be the first on-shore commercial oil extraction in Victoria since a 1920s project based at Lakes Entrance.

Bass Strait Oil chief executive Steve Mackie said the Codrington oil project was the corporation’s first exploratory on-shore drill in Victoria, although other companies have conducted similar projects.

He told The Standard that the petroleum explorer would not know whether the project is successful until late December.

“Plenty of research has been undertaken but this well will be the test,” Dr Mackie said.

“There is still a risk that nothing will flow and we’ll be able to determine if that is the case by December.

“If the project is unsuccessful, it will cost about $3 million but if it is, well, it will be a multi-million (dollar project).”

An illuminated oil rig was originally erected at the Windermere site in 1987 by Western Australian company Minora and was later abandoned after a second drill 50 metres away proved fruitless. The Windermere drill licence was sold off by Minora and later acquired by Bass Strait Oil five years ago.

Bass Strait Oil operations manager Gordon Wakelin-King said the three-million-barrel oil reserve was significant by on-shore Australian standards.

Australia consumes 960,800 barrels of oil per day, according to a 2010 estimate collated by the CIA world factbook.

Based on present British and American oil prices, the project could net operators up to $100 million worth of oil.

“There is quite a history of oil exploration in the south-west stretching back to the 1920s and seismic testing during the 1960s, ’70s and ’80s,” Mr Wakelin-King said.

“This (oil reserve) will be similar in scale to what’s seen in central Australia, although it is much smaller than off-shore wells positioned in the Bass Strait.”

The Codrington oil rig will be a 36-metre structure once erected in late November and will be illuminated at night.

Friends of the Earth spokesman Cam Walker said while oil or gas drilling was not as environmentally hazardous as coal seam mining, he still held reservations about the project. He said the transition of pastures from plantations back to agricultural purposes could be used by developers as a way of “flying under the radar”.

“Subsidence could be an issue as well as contamination of the water table,” he said.