Original story from The Age by Adam Carey
Vast swathes of regional Victoria are about to be sized up to see how much natural gas lies beneath the ground and if it can be tapped as a new energy source.
Onshore gas extraction was shut down in Victoria in 2014 following anti-fracking campaigning by farming and environment groups, but the Andrews government will consider lifting the moratorium on conventional gas exploration in June next year.
Fracking has been permanently banned in Victoria. The move to potentially revive onshore gas production follows a recent 10-year high in the wholesale price of gas on the Victorian spot market and a warning from the Australian Energy Market Operator that the state faces winter shortfalls in gas by 2024.
From next month the Department of Jobs, Precincts and Regions will launch a 12-month investigation of potential underground gas reserves in two large onshore basins that stretch across much of the state’s south.
In western Victoria, an area stretching from just outside Geelong to the South Australian border has been earmarked for investigation, while in eastern Victoria the study area extends from Western Port Bay, across South Gippsland and the Latrobe Valley to the Cape Conran Coastal Park east of Orbost.
The study “will identify land that may be suitable for release for exploration as well as any areas that may be withheld from exploration if the moratorium is lifted post June 2020”, a department document says. It will consider if gas drilling can take place in tandem with farming where reserves are found on agricultural land, as well as the impacts that extraction would have on water and the local environment.
The Andrews government has so far stared down pressure from the Australian Competition and Consumer Commission and the federal Coalition government to lift its moratorium.
The ACCC has written a series of reports arguing the ongoing ban is hurting consumers. Its chairman Rod Sims reiterated that call this week, arguing resuming onshore production would boost competition by allowing new players into the market, and push down excessive prices.
“There is no question they’re too high, higher than they need to be and we’re going to lose industry unless we get them back down, and that means people losing their jobs,” Mr Sims said.
Wholesale gas prices on the Victorian spot market hit $10 a gigajoule in the December quarter, their highest level in at least 10 years, according to the Australian Energy Regulator, and have doubled since 2016.
Many industrial users do not rely on the spot market for gas, instead sourcing their gas from longer-term contracts.
But these too have increased as much as threefold in the past few years, from about $3.50-$4 a gigajoule to between $6 and $13, ACCC reports show.
Wholesale gas prices have risen sharply as Australia has increased its gas exports, overtaking Qatar late last year to become the world’s biggest exporter of liquefied natural gas.
Bruce Robertson, an analyst with the Institute for Energy Economics and Financial Analysis, said it was not a shortage of natural gas reserves pushing up prices, but excessive concentration in the market, which is dominated by five corporations.
“Australian manufacturers are paying an obscenely high price and they’re going broke, but the solution is not more production,” Mr Robertson said.
“Production has tripled on the east coast of Australia and the price has tripled.”
The ACCC should compel gas producers to disclose their supplies and give a truer picture of how much gas is in reserve, he said.
Victorian Farmers Federation chief David Jochinke said farmers would only support lifting the moratorium if the Andrews government’s gas study provided certainty that extraction would not damage farmland, including aquifers.
“I can guarantee if they try to change the moratorium without giving us evidence we will be vocal and forceful in our response,” Mr Jochinke said.