Viva suffers power outage at refinery and restart could take weeks, company reveals

The outage has seen the energy player take a hit before the company learns the fate of a proposed project which woud help with the looming gas shortfall.

Viva Energy has revealed its Geelong refinery, a major source of revenues for the company, suffered a power outage on Sunday and full commencement of operations could take between one and two weeks.

The outage, the company said, was caused by lightning strikes in the neighbouring area which caused temporary loss of power. While power has since been restored, restarting the full capacity of the refinery will take at least a week and could take two weeks.

The loss of capacity will see Viva use stockpiled oil to meet market orders. The company could also increase imports to backfill or enter into swaps but the prospect of a lower reserve capacity and subsequent financial implications sent shares in the company down 1.1 per cent to $2.62 at 12.30pm on Monday.

The comes before the last round of public hearings about Viva Energy’s proposed LNG import terminal, to be held this week, with authorities set to soon announce whether the project — in a bid to prevent a catastrophic gas shortfall — will be approved.

Viva has proposed extending a pier at the site of the Geelong refinery to moor a vessel capable of receiving LNG exports, which could in turn be used to supply Victorian homes and businesses during peak-demand periods.

The proposal is, however, controversial and opposed by some influential groups, most notably the powerful private school Geelong Grammar. But, Victoria is increasingly likely to run low on gas — perhaps as soon as this winter.

The precarious nature has seen Victoria’s Labor government tweak policies in order to prevent supply disruptions.

Victorian Premier Jacinta Allan late last year said her government would fast-track new gas extraction, storage and transmission projects alongside renewable projects to “ensure reliable access to gas for Victorian businesses”.

An artist impression of how the Viva Energy gas terminal in Corio could look, with the refinery in the foreground.

In what shapes as the first test case of Victoria’s attitude towards gas, The Australian understands a decision could be announced by the end of March.

Australia’s energy industry has urged states and the federal government to accelerate approvals on bolstering supplies if there is any hope to mitigate the economically devastating impact of a gas shortfall.

But, opposition from environmentalists and other vested interests continues to sway governments, which have appeared unwilling to award potentially unpopular approvals even as they privately acknowledge the toll of a gas shortfall.

Illustrating the crunch, the Australian Competition and Consumer Commission last week conceded the country’s east coast will soon be reliant on importing LNG cargoes as supplies from traditional sources begin to deplete, which could add upward pressure on prices.

Importing LNG would require more expensive transport even if spot cargoes can be sourced from domestic exporters in Queensland. Proponents of LNG import terminals, however, insist global expansion will soon create an oversupply of LNG which will offset the higher transport costs, when compared to traditional piped supplies.

However, many analysts say a global gut of LNG will likely be several years away at the earliest.

Australia’s Energy Market Operator has warned a shortfall of gas could emerge by winter 2026 and almost definitely by 2028 as supplies from the Bass Strait, the traditional dominant supplier to the region, begin to materially run down.

Victoria is particularly exposed as Australia’s most gas dependent state, with residential homes using the fuel source for heating during winter, while its large manufacturing sector is dependent on gas to continue operations.

A gas shortfall, even if only brief, would have a material impact on all of Australia’s National Electricity Market.

Gas is used as a ‘peaker’. Gas power stations can run for short periods of time when there is increased demand for electricity or depressed supplies from renewables.

Shortfalls of gas would mean wholesale electricity prices spike when conditions are unsuitable for renewable energy generation. Households and businesses do not pay wholesale electricity prices, but it drives future tariffs.

A gas supply crunch would also inhibit the capacity of coal power stations to be shuttered as authorities warn they can only allow for the power source to be closed when there is a certainty alternative supply.

Still, gas remains unpopular, with environmentalists insisting it will delay the transition, a stance which won significant support during the 2022 election where the Greens captured a record vote.

Originally published as Viva suffers power outage at refinery and restart could take weeks, company reveals