Natural Gas occurs
naturally and is generated during the maturation of organic material deposited and buried in a sedimentary basin.

Natural Gas froms through thermogenic or biogenic processes, and is more buoyant than water so it migrates to the surface through natural fractures and aquifers. This results in surface seeps which was how hydrocarbons (coal, oil, gas) were originally discovered and produced.

Water bores across sedimentary basins usually have some hydrocarbons present.

Numerous natural seeps occur across Victoria along with evidence of hydrocarbons. This is because gas and oil are naturally bouyant and rise up to the surface, occasionally appearing in the form of oil slicks and mud islands.
Within the Gippsland Lakes there has been 
numerous sightings of ‘mud islands’ appearing at random (see images), as well as recollections from locals of swimming in natural hot springs containing methane and hydrogen sulphide.water bores for over 100 years.

A local Gippsland fisherman from a light aeroplane sighted a newly formed mud island in September 2013, in earlier images of this same location the island is absent.  (see second image)

Take note of the blackened areas present at the surface, indicating natural gas upwelling from below the lakebed. (See top right image taken from video)Similarly, the Chairman of Lakes Oil, Rob Annells was in Gippsland Lakes on a boat when he sighted another newly formed island in Lake King, this island eroded just as quickly as it formed days later. 

Throughout the Latrobe Valley there are known cases of locals utilising the natural gas found in their water for their own purposes. One such example is the Bayview Boathouse at Gippsland Lakes, which utilises the natural occurence of gas present in their groundwater for lighting their eternal flame out the front of their lodge, and also for heating their thermal hot pool.