A Victorian taskforce has recommended the lifting of the ban on the coal seam gas extraction method known as fracking.

The Gas Market Taskforce, headed by former Howard Government Minister, Peter Reith, has delivered a report saying there is a lot of exaggeration about fracking.

The report says there is compelling evidence that the practice should be allowed.

But the Premier, Denis Napthine, has extended the ban on fracking until at least June 2015.

He says he wants more information on the effects of fracking on the state's water supplies before making any decisions.

"We will never, ever allow onshore gas if it jeopardises our underground water," he said.

The extension of the ban has disappointed the managing director of Lakes Oil, Rob Annells, whose company had been using fracking techniques to extract gas from onshore wells in Gippsland.

Mr Annells says his company will have to revert to alternative extraction processes.

"Industry is already suffering by the high dollar and high wage costs and now we're going to add to it high energy costs so I think it's a disaster for Victoria," he said.

The report will be open for public consultation until March next year, before community consultation sessions are held across the state.