Geelong gas port plan can ease Victoria’s energy crunch, Viva boss Scott Wyatt says

In the calm waters of Corio Bay in Victoria, a proposal to build a specialised shipping terminal might hold the key to avoiding a repeat of this year’s east-coast energy crisis, or a worse one still to come.

Viva Energy, owner of the Geelong oil refinery, is seeking to develop a floating facility here that can receive super-chilled cargoes of liquefied natural gas – LNG – from Western Australia or even overseas.

A burst of cold weather, a series of coal-fired power plant failures and a global energy crunch have all collided to create a “perfect storm” of extraordinary demand for natural gas, plunging the east-coast energy system into its worst turmoil in recent memory. Wholesale gas prices this year are four times higher than their usual levels. In Victoria, Tasmania and South Australia, the Australian Energy Market Operator has had to sound the alarm over perilously low reserves. And within two years, regulators warn, there is the risk of actual shortages hitting homes and businesses on peak winter days.

“We’ve already seen how close Victoria came to a genuine shortfall of gas supply, and obviously that’s significant for the 2 million-plus businesses who rely on gas to heat their homes or cook,” says Scott Wyatt, Viva Energy’s chief executive.

“Avoiding this is really critical for the state – so the quickest and most efficient way of dealing with that is to build an import facility, which is what we are proposing to do at Geelong.”

While Australia produces much gas, massive amounts are locked in to contracts to be sold to overseas buyers, or are in faraway parts of the country where it is either too expensive or physically impossible to supply demand centres in the south that need the fuel the most. Offshore gas fields in the Bass Strait, which have traditionally supplied up to half of the eastern seaboard’s gas demand, are now in rapid decline.

An LNG import terminal, giving Victoria the ability to receive liquefied gas from anywhere in the world and turn it back into vapour, could be an important lifeline for households and gas-reliant manufacturing firms facing the threat of bill shock or shortfalls as supplies continue to tighten.

But environmentalists and local activists fear it may also set back Australia’s climate ambitions by entrenching the use of fuels that pollute the atmosphere and contribute to global warming.

“Now is precisely the wrong time to be advancing a new gas terminal in a booming regional community that has already made it clear there is no social licence for Viva to proceed,” says Environment Victoria’s Jono La Nauze, whose organisation is backing a fight to block the project from regulatory approval.

Rather than investigating ways to boost supplies, he adds, demand-side initiatives like Victoria’s “gas substitution road-map”, released on Saturday, could cut gas consumption instead through reducing the number of gas connections in new properties and accelerating programs to replace old gas heaters with electrical appliances.

La Nauze says Victoria’s road-map lacks necessary “urgency” necessary because it stops short of banning new gas hook-ups as other jurisdictions in the world have done, but he points to a report by the state’s independent infrastructure advisor finding gas use could be halved by 2030 with the “right policies”.

“Reducing gas consumption at that rate would solve short- and medium-term supply concerns, giving enough time to hard-to-convert sectors to prepare for the transition,” he says.

Viva’s LNG proposal is among five similar projects being pursued in south-eastern Australia, including one by billionaire Andrew Forrest near Wollongong. While many are targeting start-up dates by 2023 and 2024, timelines remain uncertain.

As Viva’s project goes through public hearings, it is facing objections from Geelong residents, conservationists, tourism groups and schools. Wyatt is urging critics to view it through the lens of striking a balance between energy security and energy transition, while also avoiding the need to drill more gas fields or build new pipelines to bring gas from north to south. As well, he says, unlike AGL’s failed attempt to build an LNG import terminal at Victoria’s environmentally sensitive Crib Point, Viva’s plan is at an existing refinery and industrial port facility that already receives large numbers of oil tankers each year.

“One of the big challenges we’re having in the energy debate is that it’s kind of ‘one or the other’, but the reality is, you don’t just switch off your current energy systems and replace it with renewables … you’ve got to maintain a level of security around your traditional fuels because they are so critical to the economy and our whole way of life,” says Wyatt.

“This project doesn’t get in the way of actually making the transition, it fills a gap for a period of time to maintain supply and allow a sensible transition. I think we all actually want the same thing.”

For Wyatt, a community campaign against the LNG terminal is the latest challenge he must confront after a turbulent two years for the ASX-listed fuels supplier, which runs Australia’s Shell and Liberty petrol stations. In 2020-21, lockdowns confined people to their homes, wiped out fuel usage and pushed its Geelong refinery to nearly breaking point. BP and Exxon’s local refineries shut their doors. Viva decided to stay open following the formation of a federal government support package for the industry.

Fast-forward to 2022, and the sector has shifted from a demand crisis to one of supply. Russia’s invasion of Ukraine has upended the market, as countries across the globe shun cargoes of Russian crude and deepen a global shortage. Wyatt says the decision to retain the Geelong refinery despite the heavy losses had left the business in an enviable position now. “It’s helped us maintain good, continuous supply to our markets at a time when all the traditional oil supply chains are completely disrupted,” he says.

Wyatt, a former Shell executive who has led Viva since 2014, has a big-picture vision for the company’s Geelong refinery site as the transition to cleaner energy picks up pace. First is the LNG terminal, but beyond that, the company is also pressing ahead with plans to begin zero-emissions “green hydrogen” manufacturing for hydrogen fuel-cell heavy vehicles. It is also targeting the development of a solar farm, and blending and processing biofuels.

By 2030, Wyatt hopes to be leading a company that has made meaningful progress on developing cleaner energies to the point that they move from being “concepts and ideas to actual commercial realities” that can compete with the traditional fuels Viva makes and sells.

“As we approach that 2030 period, success for me will be having a material, non-traditional business … but recognising that we still have an important role to play in many traditional areas as well,” he says. “They can go hand in hand, and it’s all part of that longer-term transition.”

 

Extracted from The Sydney Morning Herald

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