Australia's competition watchdog has also warned of a possible shortage of gas reserves in the domestic market this year. The Australian Competition and Consumer Commission took another shot at the Andrews government last week over its refusal to lift Victoria’s temporary ban on onshore gas exploration, arguing the moratorium is holding back investment that would ease gas prices. The moratorium is not due to be lifted until 2020, despite pressure from the ACCC and the Turnbull government. The issue could influence the state election in November, with Opposition Leader Matthew Guy reaffirming on Friday a promise to lift the moratorium, “flushing our market with natural gas”.

While it is sticking to the moratorium, the Andrews government will begin a search from July for new gas storage fields in Victoria’s south-west, which could be used as buffers when supply is tight or prices surge. The Andrews government hopes gas could be pumped into a series of new or depleted underground reservoirs between Warrnambool and Port Campbell. The Department of Economic Development, Jobs, Transport and Resources has called for tenders to conduct a detailed technical study of potential onshore gas storage sites, including how much gas could be stored in the region. The study is due to wind up in late December, after the November 24 poll. Tim Pallas, the Minister for Resources, said the possible underground gas storages could help reduce the cost of gas.

“Storing gas underground can help secure more reliable gas supplies and mitigate short term price peaks – particularly during any interruptions in the gas supply system and periods of peak demand,” Mr Pallas said. Resources Minister Tim Pallas: Underground gas storage could ease price spikes. Credit:Chris Hopkins The ACCC has said underground gas storage has an important role to play in securing supply in Australia’s east coast gas market, which it has said in a series of reports in recent months is not acting in the interests of domestic consumers. The competition watchdog’s chief executive, Rod Sims, directed yet more criticism the Andrews government’s way late last week, in a speech to the Australian Energy Users’ Association. Gas has become much more important to the Victorian energy market since the Hazelwood coal-fired power plant closed in March last year, but has also become scarcer and therefore much more expensive, Mr Sims said.

This has been “a double whammy” for the market, and could force some industrial gas users to close or shed jobs, he said on Thursday. “If the market was functioning effectively, the current price signals would be expected to encourage additional investment in new sources of gas supply,” Mr Sims said. “But moratoria and other regulatory restrictions in Victoria, NSW and Tasmania are impeding the market response by not allowing onshore exploration and development of potential onshore gas resources.” Mr Pallas said any expansion of the underground gas storage industry in Victoria would create jobs in regional areas. But the Coalition said the search was just another delay tactic, when action could be taken now to ease gas prices.

“It’s two more years in which Victoria’s gas supply is being restricted and two more years consumers are denied cheaper prices,” opposition energy spokesman David Southwick said. There are confirmed onshore gas reserves in the Otways region, which the private sector is currently blocked from drilling for. Labor’s desktop study will seek to identify the storage capacity of several depleted gas fields in the Otways region. Gas would be piped into the underground storages, perhaps from nearby offshore fields, if the study shows it is commercially viable. One company, Lakes Oil, has taken the government to court over the moratorium.

Gas mining company Lakes Oil owns gas reserves in the Otways and in Gippsland that it is banned from drilling due to an Andrews government moratorium on onshore gas. Credit:Jason South The underground gas storage search will form part of the government’s $42.5 million Victorian Gas Program, which will run until 2020. The program aims to determine how much commercially viable onshore gas Victoria has. A progress report released in January estimated there was about 110 petajoules of conventional gas, which equates to a little over six months’ supply.