A proposed lignite mine near St Bathans in Central Otago could yield enough barrels of fuel a day to meet New Zealand's diesel needs as well as creating 2700 jobs, says the company behind the project.

L and M Coal Seam Gas and L and M Central Otago Lignite hold exploration permits for the Hawkdun lignite deposit, over 98sq km in the upper Manuherikia Valley, near St Bathans.

The boundaries of the 65,000ha Oteake Conservation Park were amended last year to exclude a 195ha area over the Hawkdun deposit.

L and M Group financial controller Shirley Herridge says Hawkdun is one of five lignite projects in Otago and Southland being explored by the company. The others are at Kaitangata and Ashers-Waituna, near Invercargill.

Forest and Bird conservation advocate Quentin Duthie said the organisation was likely to oppose any move by L and M to seek a mining permit for the Hawkdun deposit.

"That's the sort of thing we would think was inappropriate for an area beside a conservation park, both from a climate change point of view - converting the coal to fuel involves the production of greenhouse gases - and the impact mining would have on conservation values," he said.

L and M Group exploration director David Manhire said yesterday no decision had been made on which projects the company would seek mining permits for.