Viva Energy delays Victorian LNG import decision amid buyer inertia

Viva has pitched a Victorian LNG import terminal near Geelong as a remedy to a looming gas shortfall. The market has other ideas and the operator will delay going ahead until there is more certainty in the gas market.

Viva Energy’s floating gas terminal near Geelong. Picture: Supplied

Viva Energy has pushed back a final investment decision on its proposed LNG import terminal in Victoria, as prospective energy buyers baulk at locking in long-term deals amid deepening uncertainty over the future of the east coast gas market.

The Geelong-based fuels supplier had hoped to approve the project, which has already been endorsed by the state Labor government, by late 2025, having pitched the terminal as a timely backstop to Victoria’s looming supply risks at a time when production from the Bass Strait is in decline. But producers, retailers and industrial users have grown increasingly reluctant to commit to imported LNG as a backstop, citing policy flux and lingering questions over basin depletion.

Industry sources told The Australian Viva has slowed the project’s development timeline and now expects to make a final investment call in 2026. A Viva spokesman confirmed the delay.

“Viva Energy has adjusted its [final investment decision] timetable to meet customer and market needs. We are currently in discussion with a number of major gas users and remain confident that our project offers the best solution to the looming east coast gas shortfall and for firming renewable generation,” the spokesman said.

The delay lands at a critical moment for energy policy in Australia. The Albanese government is conducting a sweeping review of the east coast gas rules that executives warn could deliver the most consequential set of reforms since market liberalisation two decades ago.

The review is assessing potential changes to the Australian Domestic Gas Security Mechanism, third-party pipeline access, contract transparency and obligations on retailers.

The prospect of intervention, coupled with the government’s willingness to lean into the market during tight conditions, has unsettled buyers and sellers. Long-term contracting, once the bedrock of the sector, has largely evaporated in favour of spot market purchases. But without long-term offtake commitments, retailers and intermediaries are unwilling to accept the financial risk of signing multi-year supply deals.

That inertia is stalling projects designed to serve as insurance against a gas supply drought. Victoria’s Allan government had floated giving the Australian Energy Market Operator the authority to buy gas — effectively underwriting LNG import terminals — but the proposal was knocked back by other states, including Victoria itself.

The shift to spot contracting is building systemic risk. This was exposed when the surge in global coal and gas prices following Russia’s invasion of Ukraine in 2022 left buyers scrambling and triggered government interventions. A repeat shock would leave users vulnerable to volatile international prices.

Yet many buyers are gambling that, in a crisis, Canberra would simply step in. That belief has been reinforced by Labor’s decision to impose a $12 a gigajoule cap on new gas — a move aimed at protecting end users but one that saw most prospective supply projects suspended.

AEMO has warned the system will fall into deficit from 2029, a critical issue for Victoria, the country’s most gas-dependent state. Viva had expected that outlook to encourage buyers to act, ensuring the terminal could be delivered in time.

But some of the urgency has faded. Woodside, which will assume operatorship of the Bass Strait next year, has signalled it is prepared to launch a new drilling program that could extend the life of the Longford processing plant. Potential supply could also be boosted by the government’s east coast review, with Labor poised to adopt a domestic reservation mechanism that would require Queensland’s LNG exporters to maintain a net contribution to the Australian market.

Such a policy would hit the Santos-led Gladstone LNG venture hardest, as it purchases domestic gas to fill its export trains. And requiring Gladstone LNG to lift its own upstream production would likely increase overall east coast supply.

In the meantime, many industrial users are favouring short-term procurement strategies, wagering on price relief.

Originally published as Viva Energy delays Victorian LNG import decision amid buyer inertia