Business leaders are warning that companies may leave Victoria as gas bills rise and the state government admits a looming energy shortfall may not be avoided even if new supplies come online by 2027.
The state’s Energy Minister, Lily D’Ambrosio, criticised her federal counterpart, Madeleine King, on Thursday over her Future Gas Strategy, which says gas had a key role to play in Australia’s energy mix beyond 2050.
But D’Ambrosio also admitted gas would be necessary in Victoria for “many years to come” after The Age revealed Victoria’s own energy department warned her that the state’s electrification efforts would not be enough to cover annual gas shortages in the state as soon as 2026.
The gas industry in Victoria is facing supply challenges.
Victorian Chamber of Commerce and Industry chief executive Paul Guerra said reliable and affordable energy was currently the biggest concern for the private sector, while asking the government to find new sources of gas.
“The supply issues around gas need to be solved before we lose the ability to drive the manufacturing sector, and ongoing electricity generation and transmission needs a clear solution before the lights go out,” Guerra said.
“Business will make decisions around their future locations. Money has choices and Victoria must be the destination for business investment, and reliability around energy provides that certainty.”
Kagome Australia chief executive Jason Fritsch, whose Echuca-based company is Australia’s largest tomato processor, said governments needed to act before businesses had no choice but to move overseas.
Kagome CEO Jason Fritsch says government needs to guarantee gas supply.Credit: Elke Meitzel
“It will happen and it is happening. We are losing businesses in manufacturing now,” he said.
“We’re trying to absolutely support the Future Made in Australia [policy], but you’ve got to be given the tools to do that.
“There does seem to be perhaps a change in position at the moment, which is good, but it’s got to be backed up with some action. Because the clock is ticking for a lot of manufacturing businesses, not only just us, but others.”
Victorian Labor condemned the federal government’s Future Gas Strategy, which committed to the use of gas to 2050 and beyond, at its state conference over the weekend. The Allan government has banned gas connections in new homes and is consulting about further action such as requiring gas appliances to be replaced with electric ones when they reach the end of their life.
Appearing before Victorian budget estimates on Thursday, D’Ambrosio said the government was pursuing its agenda to electrify homes because of looming gas shortfalls in Victoria.
But the minister, who has been a vocal critic of gas in homes, said it would remain important for the state to continue to source supplies.
“This is not like turning a tap on and off. At no point has anyone in government ever asserted that electrification is the sole solver, the single solution, to gas supply shortfalls,” D’Ambrosio said.
Fritsch said Kagome had explored alternatives, but gas remained the only viable option for its evaporative processes. The company’s gas bill has gone from $4 million to $6 million in a single year.
The Golden Beach gas storage facility is expected to come into its own as the big Bass Strait fields decline.
“We are deeply concerned about where energy is going, not only the price, but also the supply ability going forward for us to manufacture,” he said.
D’Ambrosio said two offshore gas projects in the Gippsland Basin were showing potential: the Kipper Stage 1B project and the Golden Beach gas project. However, the Kipper field’s anticipated supply isn’t expected to come online until 2026, while GP Energy’s development isn’t expected until 2027.
“They are critical,” D’Ambrosio said.
A ministerial briefing provided to D’Ambrosio, obtained by the state opposition and seen by The Age, estimates the Kipper project could help reduce the risk of supply shortages from 2027.
But it said this was contingent on achieving “higher rates of electrification” and would not protect Victoria from peak and seasonal shortfalls.
D’Ambrosio said there were currently nine onshore exploration permits and 11 petroleum production licences in Victoria. Offshore, there are five exploration permits in state waters, nine petroleum permits and 14 pipeline licences.
For its part, the federal government says Australia needs more gas to meet its climate targets and transition more of the energy grid to renewables.
In a recent opinion piece, federal energy minister King wrote that her plan to use gas up until 2050 and beyond was based on “fact and data, not ideology or wishful thinking”.
When this was put to her at budget estimates on Thursday, D’Ambrosio said: “Well, she’s wrong then. But I don’t think her comments are about Victoria.”
The state energy minister then pointed the finger at the Commonwealth for exporting gas and therefore increasing the price of the commodity for Victorian households and businesses.
”Now, no one should ever deny that, because that is a fact of the matter. Geology also tells us in Victoria our gas reserves are depleting,” D’Ambrosio said.
A federal government spokesperson said: “To meet our climate targets we need more renewables – and for the moment we need gas to get us there. The Future Gas Strategy is Commonwealth policy. State policy is a matter for the Victorian government.”
Federal Greens leader Adam Bandt said no new coal or gas projects should be built in Australia, in order to save the economy from climate change.
Energy Minister Lily D’AmbrosioCredit: Louis Trerise
Victorian Opposition Leader John Pesutto said the state Labor government had not approved any gas projects in the past few years.
“I think the minister is recognising, begrudgingly, that the community wants and desperately needs a secure and affordable supply of gas and energy more generally. But they’re not acting,” he said.
Australian Energy Producers Victoria director Peter Kos insisted Victoria had abundant onshore gas reserves.
“The government’s own Victorian Gas Program found there is up to 830 petajoules of conventional gas onshore – but that’s just what we know,” Kos said.
“The state has not been explored as much as it should have given the state’s long-running anti-gas policies and bans. The political will is missing.”
Australian Pipelines and Gas Association chief executive Steve Davies said there was a narrow window to “save Victoria from this looming gas crisis”.
“If we don’t work together and fast, Victorians will pay the price – through increasing energy bills, less reliable electricity, and job losses,” he said.
”It is essential that all stakeholders reach agreement. Without it, it is simply impossible to navigate an environment where the Commonwealth puts forward a gas strategy to encourage new supply, and a state decides that it doesn’t apply to them.“
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