Victoria’s untapped gas supplies could power state for next two decades

Using our natural gas reserves will create new jobs, lower energy costs and won’t threaten our net-zero target — so why aren’t we tapping in?

Victoria is sitting on enough untapped gas to help bolster supplies into the 2040s but unless the reserves are accessed the state will increasingly be forced to rely on imports from Queensland and elsewhere, according to a report commissioned by the Andrews government.

With the end of a nine-year moratorium banning onshore gas developments in Victoria from 2012, a range of exploration wells drilled and geological surveys have identified up to 830 petajoules of untapped gas in Victoria’s Otway and Gippsland basins.

Just one petajoule is enough gas to fuel a population the size of Warrnambool for a year.

While Victoria — the biggest gas user in Australia — consumes about 200PJ per year across two million homes and 65,000 businesses, a report by Ernst & Young for the Department of Jobs, Precincts and Regions found the onshore reserves would supplement Victorian needs; not hamper the state’s target to reach net-zero emissions by 2050; create 6400 new jobs; provide cheaper gas for regional industry and potentially add $7.6bn to gross state product over the life of production.

Victoria has enough untapped gas to power the state for the next two decades.

The Australian Energy Market Operator forecasts Victorian production from existing gas fields will fall 43 per cent, from 360PJ to 205PJ, by 2025 as offshore supplies decline and that, without new reserves, the state will face gas shortfalls from 2024 onwards.

“Victoria is outsourcing its energy security to Queensland and this is putting pressure on the east coast energy market and costing Victorian users at least an extra $2 a gigajoule whenever they need to transport gas from the sunshine state,” Australian Petroleum Production & Exploration Association chief executive Samantha McCulloch said.

Despite Premier Daniel Andrews repeatedly calling for a domestic gas reserve — where Australian gas is reserved for Australian consumption before any surplus stocks are offered for export — the Andrews government has taken a hard line against the gas industry and undermined new investment as a result of its Gas Substitution Roadmap that removes all government support for new residential gas use from the end of 2023.

“The best way to put downward pressure on prices is to bring on new gas supply that is close to where it is found because the cheapest gas is the gas closest to the customer – and Victoria is a perfect example of where this basic principle has gone wrong,” Ms McCulloch said.

Victorian households are paying more on their gas because the resource is imported from interstate and overseas. Picture: Getty Images

Gas Energy Australia chief Brett Heffernan said the Andrews government should be backing more gas not just as a transition fuel, for electricity generation as coal exits and as the only fuel that can suit thousands of industrial processes that require heat above 800 degrees C, but also as the sector develops cleaner and recycled gas, such as biomethane.

“To be clear, we support solar, wind and batteries, they will provide power — some of the time — but as governments move to rely more and more on these sources, increasingly they will need gas, including renewable, net zero gases, to fill inevitable gaps,” Mr Heffernan said.

It’s understood eight exploration permits have been issued by the Andrews government since mid-2021, mostly in the Otway Basin area, west of Apollo Bay and stretching to the South Australia border.

“Beyond the estimates provided by the Victorian government, it is difficult to know how much gas is under the ground because Victoria’s bans and policy uncertainty have meant the region has not been explored as much as it should have,” Ms McCulloch said.

Interestingly, the Ernst & Young report, completed in 2020, recommended a domestic reserve, as called for by Mr Andrews, would require gas produced from Otway and Gippsland “to be offered to Victorian gas users first.”

Originally published as Victoria’s untapped gas supplies could power state for next two decades