The gas policy in Victoria, Australia, is under scrutiny as the state weighs the risks of continued fossil fuel use against a clean energy transition built on electrification, hydrogen, and circular alternatives.

Victoria needs a secure gas supply, not hopeful or over-capitalised proposals. The State is grappling with ensuring a reliable and affordable gas supply, and there has been substantial debate about potential solutions and interventions. Solutions should have a long-term security and cost focus and ideally be in place well before shortages arrive. That horse may have bolted, but now is the time for urgent and precise action.

The one agreed position is that securing the gas supply is critical for Victoria and the East Coast. Gas shortages would cause human and economic hardship. Gas is crucial to both industry and households as it facilitates the transition away from coal and supports the integration of firm renewable energy sources. It will be the consistent through-line of the energy transition. AEMO’s GSOO Report, released last Thursday, reiterates – as it has for many years – the urgent need for new supply.

The public debate has focussed on supply security (including sovereign production) and price. For each, it is essential to focus on the underlying driver of the problem – the gas fields in the Bass Strait are depleting. These vast and inexpensive resources have supported Victoria for nearly six decades. They have been a world-class resource and highly beneficial to Victoria, but they are a physical resource that is dwindling; there is no replacement for them.

As a major manufacturer in Victoria, Viva Energy’s Geelong Refinery is one of the largest consumers of gas in the State and a critical supplier of fuel to both Victoria and the rest of the country. With over 70 years of operations, we share the concerns of other gas-reliant businesses and the 2 million Victorian households that rely on gas. For us, the rising cost of gas prices poses a threat to the long-term viability of our manufacturing operations.

Viva Energy is proposing to build a liquefied natural gas (LNG) terminal in Geelong, recognizing that it may soon become the most important and reliable means of supplying gas to the residents and businesses of our State.
A gas terminal in Victoria can solve our concerns permanently. It opens access to all of Australia’s and the world’s gas. It is minimal infrastructure – utilising an existing industrial location, floating processing equipment, and a short tie-in to the existing pipeline infrastructure. And it is flexible – when Victoria needs significant gas, it can deliver it; and as we reduce reliance on gas, it can flex down and ultimately sail away.

Alternative approaches have suggested that the East Coast states need to drill for more gas locally and reserve some of it for domestic use. While we welcome the search for new gas sources, it is now too late to meet our immediate need.  Gas exploration is a risky, complex, time-consuming, and expensive process – any new sources that are discovered will take many years to develop, and there is no guarantee they will be economically viable. The volume we are losing from the Bass Strait is significant, and there are no identified opportunities that can fill this gap.

Pipeline owners have suggested we need to expand or duplicate pipe connections from Queensland and the Northern Territory to the south. But not even these proposals deliver the significantly increased capacity necessary to service Victoria’s winter needs – Melbourne is just too far away and too costly.

Typically, pipelines are financed based on long-term payback assumptions, and they require many years to plan, approve, and execute. Multi-billion-dollar, long-term projects delivering inefficient outcomes are unlikely to fill the gap – and this is why there is no such proposal that addresses Melbourne’s supply concerns. Furthermore, these proposals rely on connecting to undeveloped gas fields in the Northern Territory. Given the immediacy of the shortfall, nothing could be riskier or less responsible than to base our state’s energy security on such an approach.

In contrast, a gas terminal could be operational in Geelong by winter 2028, delivering gas and mitigating all supply risks. For the first time, in addition to the global market, it will connect the East Coast market to resources such as the gas fields in northwest Australia.  These resources have been exclusively available for export and domestic use in Western Australia, but an import facility will finally connect Australia’s west with its east via shipping, forming a “virtual pipeline.” Importantly, this solution is much cheaper and quicker to build, and it has a significantly smaller physical impact.

Regarding gas prices, it is worth revisiting the underlying issue. The Bass Strait field resources, which are rapidly declining, have benefited Victorians with very cheap gas for many decades. These fields are not being replaced in size or efficiency, and hoping for discoveries that would do so is wishful thinking. Gas produced in Queensland is not inexpensive – it has a significantly higher cost base than Bass Strait gas, plus the additional costs of long-distance pipelines to transport it to Victoria. New gas fields cannot be relied upon to return to historical gas prices. If the resources were that attractive, they would have already been developed.

As a result, wholesale gas pricing in Australia has shifted significantly – on average, it has quadrupled since 2010. Furthermore, the establishment of an East Coast export market from Gladstone was facilitated by long-term agreements with international customers in Asia. This global exposure changed the game for pricing many years ago, as the ACCC has long reported; however, it is critical to note that this gas would not have been developed without that pricing support. 

Contrary to the suggestion that gas terminals will elevate prices, expanding the potential supply sources will bring competitive pressure on prices. Gas terminals will bring diversity and market competition, operating in a manner similar to traditional markets. When international gas is cheaper to land in Australia, it will flow, and if local gas is more affordable, the imported gas won’t be able to compete. Gas terminals will also add price transparency, as the market can see the markers that are relied upon for both import in the south and exports from Gladstone.

The ACCC has opined on this, and it is a point that is often overlooked. Its view is that gas terminals will act as a cap on local pricing, reflecting that exact market dynamic. As a major gas buyer that has experienced the challenge of captive market pricing during a supply squeeze, Viva Energy welcomes the advent of international competition, which caps price peaks.

And that international supply is meaningful. The global LNG market is large and diverse, and both the US and Qatar are expected to bring on significant new supply in the coming years. No one can accurately predict commodity pricing, but the forward curves for LNG contracting clearly show that international pricing will become competitive through the end of this decade.

Victoria does not have the luxury of time; the forecast structural shortfall is for winter 2029 (or even 2028), the tightest timeline for primary project delivery. We need pragmatic, timely, and secure solutions. New fields, new pipelines, and new reservation policies are all lovely in theory, but what we need is more gas in Melbourne. To re-iterate – as a major manufacturer reliant on gas, we welcome any local development that can increase supply and reduce costs, but we don’t plan our business on hope or conjecture.

A gas terminal in Victoria will support a more stable gas market and stimulate competitive pricing. It is a “virtual pipeline” that allows for the swift and efficient transportation of gas from where it is produced to where it is needed most – and it can be built in time to meet forecasted shortfalls. It is our only realistic solution to secure Victoria’s gas supply.

Lachlan Pfeiffer
Viva Energy Chief Strategy Officer

This opinion article appeared on page 23 of The Australian on 27 March 2025.

Follow the link to the original article » GO.

Media Enquiries:

Michael Cave
T: +61 409 647 910
E: michael.cave@vivaenergy.com.au

About Viva Energy

Viva Energy (ASX: VEA) is a leading convenience retailer, commercial services provider, and energy infrastructure business, with a history spanning over 120 years in Australia. The Group operates a convenience and fuel network comprising almost 900 stores across Australia, supplying fuels and lubricants to a total network of nearly 1,500 service stations.

Viva Energy owns and operates the strategically located Geelong Refinery in the state of Victoria. Its bulk fuels, aviation, bitumen, marine, chemicals, polymers, and lubricants businesses are supported by more than 20 terminals and 79 airports and airfields across the country. www.vivaenergy.com.au