Energy Minister Lily D’Ambrosio: ‘Gas has a role to play in Victoria’s energy transition’

The Allan government has given the green light to a plan to pipe gas from an offshore gas field in the Otway Basin near Port Campbell – the first time a licence has been granted in Victoria since 2014.

Victoria’s first gas extraction project in a decade has been approved by the Allan government, amid furious ­debate about the state’s future energy supplies.

Energy Minister Lily D’Ambrosio has approved Beach Energy’s plan to pipe gas from an offshore gas field in the Otway Basin near Port Campbell, in western ­Victoria, from June 30.

The Australian company’s ­project is to produce 160 petajoules over 15 years – with the new supplies locked into the local market.

Victoria’s total annual ­demand from households and businesses is about 188 ­petajoules.

The new gas had already been factored into Australian Energy Market Operator forecasts, meaning it will not ­address expected shortages caused by dwindling supplies.

The Allan government has approved the gas plan in the Otway Basin. Picture: Diego Fedele

But it is likely to reignite ­tensions over the importance of gas in the transition to ­renewable energy.

Ms D’Ambrosio said the government would continue a long-term push to wean Victorian homes off gas, but that the transition to renewables would see gas play a role.

“We’ve always been clear, gas has a role to play in Victoria’s energy transition,” she said.

“It’s critical we support ­Victorian homes and businesses that can electrify, to do so – helping Victorians save on their energy bills and preserving gas supply for use in businesses, manufacturing and power generation.”

Lily D'Ambrosio says the government will continue a long-term push to wean Victorian homes off gas. Picture: Andrew Henshaw

A report by the AEMO earlier this year says demand for gas in Victoria is likely to outstrip supply by 2028, when the state could become a net importer.

Additional supply and storage projects would be needed to avoid this, at a time when coal-fired power stations were approaching the end of their lives.

Beach Energy’s exploration offshore began in 2020, with gas identified the following year.

An environmental plan was submitted in February, while a final operations plan for the onshore component of the licence was submitted early last month.

Beach Energy’s exploration offshore began in 2020. Picture: Kelly Barnes

It was the only new gas production application before the state.

The last time a licence was granted in Victoria to extract offshore gas by conventional means was in October 2014, shortly before Daniel Andrews took Labor to his first election victory.

At the time, the Coalition government had a short-term ban on unconventional drilling – such as “fracking” – in place as well as a moratorium on conventional onshore drilling, which was only lifted by the Andrews government in 2021.

A permanent ban on unconventional drilling is now in the Victorian Constitution. There are nine onshore and five offshore exploration permits in Victoria, but Ms D’Ambrosio has said there are no proven or probable reserves onshore.

AGPA chief executive Steve Davies said Victoria required “a major course correction on gas – millions of households, businesses, and the broader state economy depend on it”.

“The greenlight of this project is a welcome first step. However, it has already been accounted for in AEMO’s forward projections, meaning it will not improve Victoria’s gas supply outlook. The only solution that helps accelerate the exit of the state’s brown coal generators and lowers costs for households and businesses is new gas supply.

“It is essential the Victorian government continues to support the investment environment in new supply by not undermining future business cases through prescriptive policy and gas bans.”