Viva Energy’s Geelong refinery, a key revenue generator for the company, has experienced a significant power disruption, with full operational recovery expected to take up to two weeks.
The incident, which occurred on Sunday, was triggered by lightning strikes in the surrounding area, causing a temporary power failure. Although electricity has been restored, the refinery’s operations are unlikely to return to full capacity for at least one week, and potentially up to two.
To meet market demands, Viva plans to rely on its stockpiled oil reserves, with the possibility of increasing imports or engaging in swaps to secure additional supply.
This disruption comes just before the final public hearings this week regarding Viva Energy’s controversial proposal for a new liquefied natural gas (LNG) import terminal. A decision on the project, which aims to avert a looming gas shortage, is expected to be announced soon.
Viva’s proposal involves extending a pier at the Geelong refinery to accommodate a vessel designed to transport LNG, which could provide a vital supply of gas for homes and businesses in Victoria during peak demand periods.
However, the plan has sparked significant opposition, particularly from influential groups such as Geelong Grammar, a prestigious private school.
Victoria is increasingly at risk of a gas shortfall, with some experts warning it could happen as early as this winter. In response, the state’s Labor government has adjusted policies to avoid potential supply disruptions.
Late last year, Premier Jacinta Allan announced that her government would expedite gas extraction, storage, and transmission projects alongside renewable energy initiatives to ensure a steady gas supply for Victorian businesses.
The decision on the LNG import terminal could be reached by the end of March, marking a crucial test for the state’s approach to gas management.
Australia’s energy sector has called for swift government action to boost gas supplies, urging both state and federal authorities to speed up approvals in order to avoid the economic consequences of a gas shortage.
Despite these calls, environmentalists and other groups continue to push back, with governments hesitant to approve unpopular projects, even as they privately acknowledge the risks of a gas shortfall.
The Australian Competition & Consumer Commission recently warned that the east coast of the country will soon rely on LNG imports, as traditional gas sources begin to deplete. This shift could drive up prices, as importing LNG typically involves higher transportation costs, despite the possibility of securing spot cargoes from Queensland.
Advocates for LNG import terminals argue that global expansion of LNG production will eventually create an oversupply, which will offset higher transport costs when compared to traditional pipeline supplies. However, many analysts suggest this global oversupply may not materialise for several years.
The Australian Energy Market Operator has raised alarms that a gas shortage could emerge as early as winter 2026, and more likely by 2028, as production from the Bass Strait—the region’s primary gas source—declines.
Victoria, Australia’s most gas-dependent state, is especially vulnerable, with households relying on gas for winter heating and a large manufacturing sector dependent on it for operations. A gas shortfall, even a brief one, could have a substantial impact on the entire National Electricity Market.
Gas plays a crucial role as a “peaker” fuel, with gas-powered stations ramping up production during periods of high electricity demand or when renewable energy sources fall short. A gas shortage would drive up wholesale electricity prices during times when renewable generation is insufficient. While households and businesses do not pay these prices directly, they influence future tariffs.
A gas supply shortage would also limit the ability to shut down coal-fired power stations, as authorities can only permit their closure when a reliable alternative supply is in place.
Despite its essential role in the energy mix, gas remains a divisive issue. Environmental groups argue that reliance on gas will delay the transition to renewable energy, a position that gained significant traction during the 2022 election, when the Greens secured a record share of the vote.
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