Victoria’s gas supply problem won’t go away quickly, according to industry leader

An energy industry leader has revealed the “frightening” reason why Victoria is facing an extended gas crunch.

Victoria faces an extended gas crunch because of a “frightening” lack of new supply projects, according to an industry leader who blames a decade-long failure of energy policy.

The Australian Energy Market Operator was able to stave off a shortfall on Thursday after tapping a supply guarantee for the first time to ensure households could keep their heating on and businesses could continue operating.

Santos boss Kevin Gallagher said the situation — described as a “perfect storm” by new Energy Minister Chris Bowen — was the result of a decade of “moratoriums, shutdowns and lockouts in resource-rich states and territories”.

Speaking in Melbourne, Mr Gallagher pushed back against calls for the federal government to pull the handbrake on gas exports, saying shortages and price shocks had “nothing to do with the behaviour of gas producers or exports”.

“This is the consequence of more than a decade of energy policy failure that has stopped the industry developing more gas supply in a timely manner,” he said.

Santos boss Kevin Gallagher said the situation was the result of a decade of “moratoriums, shutdowns and lockouts in resource-rich states and territories”. Picture: Glenn Campbell

While the gas pipeline from Queensland to Victoria was 98 per cent full on Thursday, the market operator said “supplies remain tight” and price caps would remain in place for now.

Mr Bowen called an urgent meeting of his state and territory counterparts next week, as he said all options were on the table to respond.

The Australia Institute’s climate and energy program director Richie Merzian urged the government to curtail exports to “safeguard a sufficient affordable gas supply for Australians”.

But Mr Bowen poured cold water on pulling the trigger to restrict exports, saying it was “not a short-term answer” because the measure could not be implemented until January 1.

Daniel Andrews said it was “highly unlikely” Victoria would face a gas shortage.

“We’ve got the coldest start to winter we’ve seen for a long time and that does put some pressure on the system,” the Premier said.

Premier Daniel Andrews said Victorians should not be worried about gas supply for things like their heater just yet.

Australian Petroleum Production and Exploration Association acting chief Damian Dwyer said the majority of manufacturers were unaffected by soaring prices because they were on long-term supply contracts.

Mr Bowen did not blame the former government for the “serious and challenging” situation fuelled by the east coast cold snap, coal-fired power station outages and geopolitical factors.

But he said: “The former government promised a gas-fired recovery and left us a gas bin fire.”

Mr Gallagher said the only way to drive down prices was to bring online more supply.

“We must maintain the momentum of the energy transition without compromising energy security — and that includes affordability,” he said.

“And we can only do this through decarbonisation, not defossilisation.”