Santos, one of the largest Australian energy companies, has likened investment conditions in Victoria to those in North Korea while declaring federal permitting delays are making it harder to sanction new oil and gas projects across the country.

The comments by Santos managing director Kevin Gallagher underscore gas executives’ long-held frustration over what they view as a hostile attitude to their industry in Victoria, but drew firm criticism from the state government, which described them as “truly unhinged” and “plainly wrong”.

“There are billions of dollars of new gas investment scheduled in Victoria for this year alone,” Victorian Energy Minister Lily D’Ambrosio said.

While 2 million Victorian homes still use gas for heating, cooking and hot water, Santos and other gas companies argue state drilling restrictions and ambitious targets to curb harmful fossil fuel emissions have hindered their ability to develop new gas reserves and offset falling supplies from ageing production fields, leaving consumers at risk of energy shortages and rising bills.

“Queensland, the Northern Territory, South Australia, Western Australia – these are actually very supportive jurisdictions, they are very development-friendly,” Santos managing director Kevin Gallagher said on Wednesday. “Victoria, North Korea – they are in a different category altogether.”

A moratorium was placed on all onshore gas exploration and development in Victoria in 2012 by Denis Napthine’s Coalition government. The Victorian Labor government overturned the ban on conventional onshore gas drilling in 2020, but has kept the ban on coal seam gas extraction and fracking.

There are signs that gas demand is falling as consumers increasingly make the switch from gas stoves and heaters to electric alternatives, aided by Victorian government schemes and policies banning gas hook-ups in new homes. Non-industrial gas use in Victoria has fallen 4.5 per cent since 2023.

However, the shift is still not happening fast enough to avert the need to secure more gas, warns the Australian Energy Market Operator (AEMO). The vast gas fields in Bass Strait that have supplied the local market for decades continue depleting rapidly with few projects to replace them, leaving Victoria and NSW at risk of winter gas shortfalls before the end of the decade.

D’Ambrosio on Wednesday said a combination of lower demand and new gas investment – including a $350 million ExxonMobil and Woodside program to drill new wells in Bass Strait – had helped push out the market operator’s forecast gas shortfall from 2028 to 2029.

The Victorian government had approved the only new application for a gas production permit it had received in the past 10 years, and was seeking to fast-track other approvals, she added.

“We’ve always said gas is part of our energy transition,” D’Ambrosio said. “We’re working to bring on more gas supply.”

There are eight gas-exploration permits onshore in Victoria and three exploration permits in offshore Victorian waters.

Speaking at the Australian Energy Producers (AEP) conference in Brisbane on Wednesday, Gallagher said ambiguity over state and federal environmental approvals processes made Australia one of the most difficult places to sanction new investments.

“We’ve got 100 years of gas under our feet,” he said. But only a “fraction” of Australia’s known prospective gas basins were presently in development, he said.

Work ground to a halt at Santos’s $5.8 billion Barossa gas project off the Northern Territory in 2023 after environmental lawyers secured last-minute legal orders to block the construction of a pipeline by arguing the company had not adequately consulted Tiwi Islander traditional owners – claims that were later dismissed.

Its controversial Narrabri gas project in northern NSW, which could deliver up to half of NSW’s natural gas needs, has also run into years of delays amid legal appeals and objections from environmental activists, some landholders and the Gomeroi traditional owners, who fear the plans to drill 850 gas wells could inflict irreversible damage on their culture, lands and waters and worsen global warming.

Federal Resources Minister Madeleine King this week put oil and gas executives on notice that the re-elected Albanese government will make them do more to avert local energy shortfalls.

Speaking at the AEP conference on Tuesday, King said Australians were “tired of seeing our vast gas resources exported overseas” while paying high prices at home.

Some Australian LNG producers were “doing the right thing” in ensuring the market had enough gas, added King, who pointed to agreements struck this year to divert an extra nine petajoules of gas to stave off a quarterly supply deficit. “I thank them for that,” she said.

“But there remains a lot of work to do to ensure the domestic market remains well supplied.”

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