Geodynamics plans to drill three wells in the Cooper Basin in South Australia state to depths of between three to five km (two to three miles).

It will then circulate water through the 290 Celsius (554 Fahrenheit) granite at the bottom of the wells before drawing it out and using it to generate power.

At the same depth in France, the temperature of the granite only reaches about 200 Celsius. Current technology only allows oil wells to be drilled to a maximum depth of five km.

"With the world's attention focused on the finite oil reserves of the Middle East, the need for a dependable renewable energy source has never been stronger," Geodynamics Chief Executive Bertus de Graaf said in a statement.

The Habanero 1 well is the first stage of the company's $16 million Hot Dry Rock (HDR) geothermal energy programme.

Geodynamics estimates the stored thermal energy accessible in a 1,000 metre thick slab of granite in its Geothermal Exploration Licence area is equal to 50 billion barrels of oil, compared with Australia's proven oil reserves of three billion barrels.

The largest shareholder in the company is Woodside Petroleum (WPL.AX), which purchased a 31.6 percent stake through its renewable energy unit Metasource.

Santos Ltd (STO.AX) has signed a memorandum of understanding for the supply of 13 megawatts of power to its Moomba production plant in South Australia from Geodynamics' demonstration power plant, due to be operating by mid-2005.