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Gas ‘reality dawning’ for Victorian government, says exploration firm

Gus McCubbingReporter

Sep 9, 2024 – 5.41pm

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Victorian gas company Lakes Blue Energy says the Allan government has finally “woken up” to the need for gas, ahead of severe predicted shortfalls.

Premier Jacinta Allan on Monday revealed her government was preparing to introduce legislation to parliament to support offshore gas storage. Ms Allan said gas “has a role in our energy transition” in a distinct public softening of the government’s stance on the resource.

The Victorian opposition says there is a “clear division” between Premier Jacinta Allan (left) and Energy Minister Lily D’Ambrosio on the future of gas. Simon Schluter

Lakes Blue Energy, formerly known as Lakes Oil, is about to seek approval for a project in Gippsland that it says could provide 10 per cent of Victoria’s gas needs from late 2026.

Chief operating officer Tim O’Brien said if approval was granted for the project, which does not require fracking, drilling would begin in mid-2025. He added that it could then produce 50 terajoules of gas daily, providing about 10 per cent of Victoria’s gas needs for the next 20 years by late 2026 or 2027, which is when the state is expected to start facing shortfalls.

The former Liberal government placed an “administrative moratorium” on onshore gas exploration and development in 2012, which was lifted only in 2020. Fracking and coal seam gas mining have been banned since 2017.

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“We’re very bullish about the exploration and have been for some time. It’s been a frustrating road, but it looks like reality is finally dawning on the government – we need reliable, locally sourced energy,” Mr O’Brien told The Australian Financial Review on Monday. “People are realising we are desperate for gas because renewables are a long way from being able to provide reliable energy.”

The company will hold a stakeholder engagement event this month before lodging its application to drill the Wombat-5 onshore exploration gas well near the coastal town of Seaspray in October to evaluate commercial viability.

Certainty for gas industry

The Australian Energy Market Operator forecasts a growing risk of peak day gas supply shortfalls in Victoria, which has the nation’s highest use of residential gas, as early as 2026.

In June, the government approved the state’s first new gas extraction project in a decade near Port Campbell, not far from the Twelve Apostles.

The Labor government is expected to introduce the legislation to support offshore gas storage later this week.

Ms Allan said it would provide certainty to the gas industry as well as companies undertaking exploration activities.

“We’re looking at making sure that, whether it’s Victorian gas [or] interstate gas, we have gas supplies here in Victoria,” Ms Allan told 3AW Radio.

“Gas has a role to play in our energy transition, but it’s a dwindling resource, and we need to continue our focus on … transitioning Victoria’s energy mix to renewable energy,” she said.

Federal Resources Minister Madeleine King welcomed the proposed legislation which, if passed, would enable the go-ahead of the Golden Beach gas production and storage project off the coast of Gippsland.

“Golden Beach, first discovered in 1967, is set to play an important role in balancing seasonal gas demand and firming renewable energy generation on Australia’s east coast,” Ms King said.

David Close, director of the University of Queensland Gas and Energy Transition Research Centre, said Ms Allan had appeared to belatedly recognise that gas would be important for energy security.

“There seems to be a growing acceptance that gas supply will need to be imported given the lack of investment in exploration and development for many years in Victoria and NSW,” Professor Close said.

“Imports are no easy option – existing pipeline expansions, new pipelines and LNG imports all face financing, approval, social acceptance and commercial hurdles. Possibly insurmountable hurdles without a capacity mechanism that includes gas.

“Increasing gas storage can decrease the reliance on gas imports during peak demand periods but, like imports, there are no easy gas storage projects and the challenges are similar to other potential solutions.”

Victorian Opposition leader John Pesutto said there was a “clear division” between Ms Allan and Energy Minister Lily D’Ambrosio, whom he accused of “demonising” gas