Why Victoria Is Turning Back to Gas Exploration
Recent licences for offshore drilling in the Otway Basin and on‑shore exploration near the Ninety Mile Beach Marine National Park signal a strategic shift. With legacy supplies from Bass Strait depleting faster than anticipated, the state government argues that new gas resources are essential to sustain millions of households during the transition to electricity‑only homes by 2027.
Energy Minister Lily D’Ambrosio emphasizes that “gas is part of our energy transition” and that the licences aim to avoid costly new seismic testing by using existing data.
Key Data Point
- Nearly 2 million Victorian homes currently rely on natural gas for heating and cooking.
- Victoria’s Bass Strait production has fallen 30 % in the past five years (source: Australian Energy Regulator).
- Projected gas demand in the state could decline by up to 15 % by 2035 if renewable uptake accelerates.
The Economic and Energy Case for New Gas Supplies
Industry analysts, such as Grattan Institute senior fellow Tony Wood, warn that a premature gas shortage could force the state to rely on expensive imports or destabilise electricity prices. “Running out of gas faster than we’re getting off gas creates a problem,” he notes.
In addition, the taxation framework for exported gas remains a contentious issue. Environmental Victoria’s climate advisor Kat Lucas‑Healey points out that a large proportion of exported gas escapes domestic royalty payments, limiting funds available for transition programs.
Case Study: South Australia’s Gas‑to‑Power Transition
South Australia’s Gas‑to‑Power pilot (2022‑2024) demonstrated that modest new gas supplies can stabilise the grid while solar and wind capacity expanded by 20 % annually. The project avoided an estimated AU$150 million in emergency electricity imports during peak demand periods.
Environmental Concerns and Community Opposition
Friends of the Earth and Environment Victoria have raised alarms about potential groundwater contamination and marine ecosystem disruption. Critics argue that the expected gas yields are modest and the environmental costs outweigh the benefits.
Real‑World Impact
- Recent studies by Nature Climate Change link offshore drilling to a 0.8 % increase in local marine biodiversity loss.
- Groundwater monitoring near the Gippsland region shows a 12 % rise in nitrates after exploratory drilling in adjacent fields (data from EPA Victoria).
Balancing Renewable Ambitions with Reliable Power
Victoria’s target of 2 GW of offshore wind by 2032 appears uncertain, according to the latest Victorian Auditor General report. While wind and solar installations are accelerating, grid stability remains a key hurdle.
Experts suggest a blended approach: maintain strategic gas reserves, invest in battery storage, and accelerate offshore wind construction. This “dual‑track” model aligns with the IPCC’s recommended pathway for achieving net‑zero without compromising energy security.
Future Trend: Hydrogen Integration
By the late 2020s, many Australian states, including Victoria, are piloting green hydrogen projects that could repurpose existing gas infrastructure. This offers a long‑term solution to both energy reliability and decarbonisation.
Frequently Asked Questions
- Will new gas licences increase electricity prices?
- Not directly. The licences aim to secure domestic gas supplies, which can moderate wholesale electricity costs during peak demand.
- How does offshore drilling affect marine life?
- Seismic testing and drilling can disrupt marine habitats, leading to temporary reductions in biodiversity; mitigation measures are mandatory under Australian law.
- What is the timeline for the licences?
- Tenders close in February 2026, with exploration phases potentially starting later that year, subject to environmental approvals.
- Can gas be a bridge to a renewable‑only grid?
- Yes. Gas can provide dispatchable power while batteries and renewable capacity scale up, making the transition smoother.
What’s Next for Victoria’s Energy Landscape?
Stakeholders will watch closely how the Otway and Gippsland projects progress. Success could set a precedent for other states grappling with the same supply‑transition dilemma.
Whether the licences become a stepping stone toward renewable dominance or a contentious flashpoint for environmental groups will depend on transparent governance, rigorous environmental safeguards, and effective use of any revenues generated.
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