AEMO ruling throws Viva Energy’s LNG terminal into doubt
Victoria's most significant gas supply project faces an uncertain future after the energy market operator refused to assess its access to critical infrastructure.
The Australian Energy Market Operator will not deliver a decision on whether Viva Energy’s proposed LNG import terminal can access a contested Victorian gas pipeline as requested by the oil company, in a move that threatens the future of the Geelong development and raises fresh concerns over energy security in the nation’s most gas-dependent state.
The project — intended to help fill a looming supply gap as Bass Strait production declines — received first-stage approval from the Victorian government earlier this year, a rare endorsement from a Labor administration historically sceptical of new gas developments.
Viva has positioned the terminal as the frontrunner to head off forecast shortages in Victoria from the middle of the decade.
Its success, however, hinges on securing access to APA Group’s South West Pipeline, which links the Otway Basin and the Iona gas storage facility in western Victoria to Melbourne’s distribution network.
On peak demand days, the pipeline runs near full capacity, and existing shippers — Beach Energy, Amplitude Energy and Lochard Energy — have warned that Viva’s entry would displace their own supplies. Lochard owns Iona, a critical buffer against seasonal demand peaks.
AEMO had been due to rule on the access bid next month. Instead, it advised on Monday that it would not progress a conditional assessment after discussions with industry, likely including Beach and Amplitude. The analysis would have been undertaken at the expense of the industry, some of whom oppose the development. AEMO said feedback from the consultations had determined undertaking the analysis would not be in the best interest of the market.
Viva’s chief strategy officer Lachlan Pfeiffer said it was imperative that more gas is encouraged into the system.
“We believe this proposal is of enormous value to market participants and those businesses and households in Victoria that rely on gas for industry, for power generation and for heating,” Mr Pfeiffer said.
“Viva Energy is continuing discussions with AEMO and government to enable it to be in the best position to make its final investment decision with certainty.”
Viva could still pay for the analysis itself, but it is understood the company was seeking firmer commitments from AEMO, which the operator said it will not provide.
Market rules prevent AEMO from allocating capacity before a project reaches a final investment decision — the point at which a developer is financially committed.
Viva has said it cannot proceed without certainty over its ability to deliver contracted gas volumes, particularly during high-demand days. Customers are only willing to commit to long-term supply deals if they can be assured of deliveries at those times.
The request comes against the backdrop of AEMO’s own warnings of tightening supply. While a market-wide shortfall is not expected until 2029, seasonal shortages in Victoria could emerge years earlier, with risks acute from winter 2026. Heavy manufacturing and households across the state remain heavily dependent on gas for heating and industrial processes.
AEMO insists it is bound by the market framework and will not break convention to address the supply outlook. Without one side shifting position, the future of the Geelong LNG terminal appears stalled.
The decision opens the door for rivals. Dutch infrastructure group Vopak is advancing a competing LNG import terminal at Port Phillip Bay, moving to accelerate development despite Viva’s perceived lead. Squadron Energy’s Port Kembla terminal in NSW — backed by Andrew Forrest — could also benefit, with gas potentially piped south into Victoria.
The prospect of relying on imported LNG remains contentious. Australia is one of the world’s largest LNG exporters, and critics argue that turning to overseas cargoes signals a failed energy market and will drive up costs. Proponents counter that social licence constraints have stifled new domestic developments and that the era of cheap local gas is over.
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Originally published as AEMO ruling throws Viva Energy’s LNG terminal into doubt
