Andrews pumps up gas supply

Better late than never, Premier Daniel Andrews has lifted Victoria’s ban on onshore conventional gas exploration and development from July next year. The move is essential if increased supplies are to offset looming shortages as the once prolific offshore Bass Strait fields dry up. In a foolish concession to green groups, Mr Andrews has also made Victoria’s temporary ban on fracking and coal-seam gas exploration permanent.

Allowing conventional gas development will boost the Victorian economy and heavy industries, which have complained that the ban has driven up prices, making it harder to compete with interstate and international rivals. The move should also help stave off future energy shortages. The Australian Energy Market Operator has forecast shortfalls in Victorian gas supply as early as 2024 if resources are not developed. And the shortages could happen earlier if winter demand is high. As Perry Williams wrote on Tuesday, energy advisory firm EnergyQuest has warned that NSW, Victoria, South Australia and Tasmania will face gas shortfalls as soon as 2022.

In anticipation of the moratorium being lifted — it was due to expire on June 30 this year — companies such as Lakes Oil have plans for drilling in place. Potentially significant onshore gas resources could be extracted from the state’s Otway Basin, which stretches into South Australia, where an industry is up and running.

Like competition watchdog Rod Sims, The Australian has consistently called on Victoria to lift the moratorium and for other states, especially NSW, to free up their supplies. The Australian Competition & Consumer Commission called for the lifting of east coast gas bans as long ago as April 2016. In August last year, Mr Sims pointed out: “If we really want permanently lower prices in the south we need more gas in the south.’’ Supply must also be increased because gas is a key transition fuel for the nation as it moves to cut greenhouse gas emissions.

Last month, in its eighth annual gas inquiry report, the ACCC warned that high gas prices were forcing factories to shut and companies to go into liquidation. The report said concerns about future gas supply were “exacerbated by the blanket moratoria and regulatory restrictions in some states and territories, which inhibit further gas exploration and development of new gas resources, ­especially in Victoria and NSW”.

While NSW permits conventional and unconventional exploration, the Berejiklian government, in an effort to appease environmentalists, has boasted it has the “toughest” regulations in Australia, particularly in relation to the fracking of coal-seam gas. In January, the Morrison and Berejiklian governments announced a $2bn agreement to strengthen NSW’s electricity grid. As part of the package, NSW agreed to bring more gas into the market. In the wake of the Victorian decision, Premier Gladys Berejiklian needs to turn her attention to clearing the way for Santos’s Narrabri project, which has the potential to fill half of NSW’s domestic supply.

NSW, unfortunately, has delayed approvals for almost a decade. Such red tape and indecision, on a par with Queensland’s dithering over the Adani coal project, is unacceptable.

The Andrews government estimates output from state gas resources could generate $310m a year for regional economies and create 6400 jobs over the lifespan of projects. That is good news for Victorians as the economy begins taking a battering from COVID-19. It also begs the question of why the state has wasted so much time.

The moratorium on conventional onshore gas exploration dates back to May 2014, when the former Napthine government suspended decisions on all onshore gas exploration in the state until after the state election in November that year, which Labor won. Rather than lifting the suspension post-election, the Andrews government consolidated it with the moratorium. The policy has been a costly failure. But following pressure from unions, industry and consumers, the reversal was essential.