Andrews lifts exploration ban, turns on gas taps

Vital gas supplies could be tapped from beneath regional Victoria next year after the Andrews government axed an exploration ban.

Victorian Premier Daniel Andrews in Melbourne. Picture: Getty Images

Vital gas supplies could be tapped from beneath regional Victoria by the middle of next year after the Andrews government axed a six-year conventional exploration ban.

The move paves the way for the state to boost production as supplies decline from the offshore Bass Strait fields.

The decision to open up Victoria’s onshore gas reserves is ­expected to exert significant downward pressure on household and industrial gas prices.

“Developing gas supply close to southern markets could avoid gas transportation costs and help put downward pressure on prices, which would be great news for Victorian manufacturers and other gas customers,” Origin ­Energy’s head of supply and operations, Greg Jarvis, said.

Following a three-year investigation, Premier Daniel Andrews said there would be an “orderly restart” of onshore conventional gas exploration and development from July 1 next year, while a temporary ban on fracking and coal-seam gas ­exploration would be made ­permanent.

The state has faced significant pressure to ease the gas ban amid forecasts of supply shortages by 2024, partly due to production drying up from the once-prolific Bass Strait. Big industrial users have been among vocal critics of the government’s move, saying it pushed up the price of locally priced gas and made it more difficult to compete with interstate and international rivals.

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Potentially significant onshore gas resources could be ­extracted from the state’s Otway Basin, which stretches into South Australia where an industry already operates.

Lakes Oil has been preparing for the ban to be lifted, with plans for drilling already in place, while Beach ­Energy and Cooper Energy also hold onshore interests in the state.

Production of Victoria’s ­resources could generate $310m a year and create 6400 jobs over the lifespan of projects, the government estimates. Any gas produced will be prioritised for the domestic market, in line with a federal government push to establish a domestic gas reservation scheme. The moratorium was due to expire on June 30.

“The government will now work with industry and communities to develop rigorous ­engagement and transparency obligations, and improve the regulatory framework — to guarantee a world’s-best-practice approach,” Mr Andrews said. “Landholders will also be supported to better negotiate ­access rights and compensation with exploration companies.”

Victoria’s moratorium on conventional onshore gas exploration dates to May 2014, when Napthine government energy minister Russell Northe opted to suspend decisions on all onshore gas exploration until after the November state election, which Labor won.

The new Andrews government maintained the suspension, intro­ducing legislation in 2017 that placed a moratorium on all conventional onshore gas exploration and production until June 30 this year, and permanently banning all unconventional gas mining and exploration, including fracking.

Industry body Appea said it was the right decision given warnings about supply shortfalls. “The government’s decision to lift the moratorium is a step in the right direction to help ensure that Victoria continues to have ongoing supplies of natural gas into the future,” Appea chief executive Andrew McConville said. “The Australian Energy Market Operator has forecast shortfalls in Victorian gas supply as soon as 2024 if more supply is not developed. Shortages could happen earlier if winter demand is high.”

Gas shortages on the east coast are set to emerge within three years and prices will remain high for the next decade, ratcheting up pressure on industrial users, EnergyQuest has also warned. The Energy Users Association said “state and federal governments must now move quickly to accelerate development of Victorian conventional gas reserves. We encourage them to work proactively together to ensure we not only get more gas flowing but enhance competition by supporting diversity of suppliers,” EUAA chief executive Andrew Richards said.