Dutch giant Vopak strikes LNG vessel deal that puts pressure on Viva’s planned Geelong terminal

Royal Vopak has secured a crucial floating gas terminal for its Victorian import project, challenging rival Viva Energy's approved development in Geelong.

Victoria could be forced to import LNG as a shortfall looms. Picture: Bloomberg

Royal Vopak has secured a critical piece of infrastructure for its planned Victorian LNG import terminal, as it bets it will beat a rival development pushed by Viva Energy despite it recently securing a key state government approval.

The Dutch infrastructure company on Tuesday said it had signed a contract with Seapeak for a floating storage and regasification unit, or FSRU – a vessel used to convert liquefied natural gas back into a gaseous form for use in domestic markets. The move is a clear signal that Vopak believes its project in Port Phillip Bay is competitive, despite the Victorian government earlier this year granting Viva the go-ahead to advance its own terminal in Geelong.

Victoria, the country’s most gas-dependent state, faces the sharpest risk from looming shortfalls in supply. The Australian Energy Market Operator has warned that without new investment, eastern seaboard markets will be exposed to severe seasonal shortages before the end of the decade, with an annual deficit expected from 2029.

Both Vopak and Viva are positioning themselves to fill the gap by importing LNG to secure long-term supplies for households and industry.

Vopak Australia managing director Paul Kanters said the Seapeak deal reinforced confidence in the merits of his company’s proposal.

“Victoria Energy Terminal is well positioned to deliver gas supply to Victoria that will address the projected supply shortfalls in 2029,” Mr Kanters said.

The acquisition of the FSRU marks one of the most significant steps in the Dutch group’s campaign to keep its project alive in the face of some scepticism about its viability after Viva won state approval.

The Geelong fuel retailer has claimed its own project could be operational by 2028. Vopak has countered by highlighting what it claims are practical and environmental advantages of its offshore design. Both have recently completed navigation simulations with Ports Victoria, Port Phillip Sea Pilots and others, which it said confirmed LNG carriers could safely access its proposed site without dredging the bay or disrupting shipping channels.

That assertion is a thinly veiled challenge to Viva, whose critics have claimed its Geelong project could require dredging to accommodate larger carriers. Viva has rejected that claim, saying dredging will not be necessary.

Vopak’s terminal would be anchored about 19km offshore from Avalon at an existing anchorage site. By avoiding dredging, the company has said the environmental impact would be minimal – a point it is keen to stress as both projects face intense scrutiny from community and environmental groups.

The battle between the two developments comes as federal and state governments wrestle with how to prevent the looming shortfall. Labor is under pressure to prioritise domestic gas users, and manufacturers say their own viability will be at stake.

The government has implemented a sweeping review of the country’s eastern seaboard gas market. The Australian on Monday reported that a scheme which ties export licences for east coast exporters with contributing to the domestic market was being considered. 

Such a scheme would likely inhibit Santos, which produces less gas than it needs to meet contracted LNG shipments via its Queensland LNG project. It supplements its own production with domestic purchases, a practice critics say exacerbates the domestic shortfall.

Santos chief executive Kevin Gallagher last week defended the approach, arguing GLNG’s offtake deals were essential for bringing new gas fields online.

He said that limiting GLNG’s domestic buying could undermine contracted deliveries to Asia. Officials from Japan and South Korea have already raised concerns with Canberra.