Victoria to deliver defining decision on Viva Energy’s proposed LNG import terminal within weeks

The decision shapes as defining for several industry players vying to take a lead role and the Victorian government.

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The Allan Labor government will announce within weeks its decision on Viva Energy’s proposed LNG import terminal, a ­determination that will test whether a looming gas shortfall has softened Victoria’s opposition towards gas.

Viva Energy has proposed extending a pier at the Geelong refinery to moor a vessel capable of carrying LNG, which could be used to supply Victorian homes and businesses during peak-­demand periods.

With a shortfall expected as soon as next winter, the state government had indicated it would make a decision in April, said sources familiar with the details.

The decision shapes as a defining moment for several industry players vying to offer a solution for Australia’s east coast gas shortage, as well as for the Victorian government.

An approval would mark a major victory for Viva in broadening its business beyond its roots as an oil refiner and more recently as a retailer, and an about-turn from the Victorian government.

In 2021, then premier Daniel Andrews killed a similar proposal from AGL Energy. The government said its rejection was driven by concerns the import terminal would damage internationally recognised wetlands.

An alternative proposal from Royal Vopak, an international energy terminal developer, would likely be scuppered, sources said.

Industry sources said the increased onus on Viva was a risk.

“Viva has never done this kind of project before,” one source said.

“They have committed to taking a financial investment decision by the end of the year but they have to complete surveys and lock in offtake agreements before construction can begin.”

Viva chief executive Scott Wyatt said he was confident the company could meet the timetable amid heightened interest as the shortage becomes acute.

While Viva accepts the need for survey works and offtake agreements, it dismisses suggestions it will need to undertake substantial dredging, as mooted by some industry figures.

The Australian understand assessments indicate more than 90 per cent of LNG vessels would be able to use its proposed facility.

Viva’s task is complicated by an alternative plan outlined by Australia’s largest gas pipeline operator and owner, APA Group, which said it could spend nearly $2bn to transport supplies from new sources at a much lower cost than LNG terminals can do.

The prospect of cheaper gas has won support from the Energy Users Association of Australia, which represents the country’s largest consumers of power.

EUAA chief executive Andrew Richards said affordable gas was the bedrock of Australia’s economy. “Many EUAA members make essential items such as bricks, steel and glass, chemicals, food and paper products,” Mr Richards said.

“These items are used by Australians every day and they all rely on the supply of affordable and reliable domestic gas.

“While new processes and fuels are being researched, in the short term affordable natural gas is an essential input.”

The prospect of additional capital expenditure has some analysts worried about APA’s balance sheet, though CEO Adam Watson insists it can comfortably manage the outlay.

“APA is confident in our ability to fund and deliver our East Coast Gas Grid Expansion Plan – and we’re equally confident that our plan slams the door shut on higher-cost, higher-emissions imported LNG,” said Mr Watson.

Industry figures said the uncertainty around which projects proceeded would lead to confusion in the minds of end users, complicating all developments.

“To get offtakers to sign on, they need major buyers to agree to long-term contracts to buy the gas they will bring in.” one said.