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Australian state Victoria maintains ban on fracking

The eastern Australian state of Victoria will maintain a ban on hydraulic fracturing (fracking) at least until 2015

Victorian premier, Denis Napthine, has chosen to ignore advice from the Gas Market Review Taskforce advising the government to push onshore gas development to help stem rising gas prices.

The taskforce recommended an immediate end to the state's 18 month-old moratorium on coal-bed methane (CBM) exploration and that the state lift its ban on fracking, a technique essential to the unconventional industry's progress.

Nathine, whose government faces an election next November, said more time was needed to ensure developing onshore gas was safe for water resources.

The premier said the government would consult on the taskforce's findings, ban certain chemicals from use in fracking and ask GeoScience Australia to study the state's underground water systems. A report will be due in July 2015.

Peter Reith, chair of the Victorian gas market review, said: "Clearly there is a lot of exaggeration about fracking. Independent advice to the taskforce from GeoScience Australia and other sources provided compelling evidence that fracking should be allowed." 

"The Victorian government is paying more attention to short-term politics than science-based evidence" said the Australian Petroleum Production & Exploration Association (Appea), an industry lobby group.

Beach Energy chief executive Reg Nelson said the decision "flies in the face" of a long history of onshore gas production and that the ban on benzene-toluene-xylene (BTX) chemicals was a “slur on responsible operators".

The taskforce also found that large industrial users of gas were struggling to secure long-term contracts.

Even if development started now, the taskforce said that it would take too long to bring unconventional gas into the market to ward off the spike in domestic prices or the shortfall in supply predicted for 2017.

Wholesale gas prices in the eastern states have already increased to around $7-9 per gigajoule (GJ) and could hit more than $10/GJ for short-term contracts given the tightest period in the market is not expected till 2017.

In Victoria, the unconventional sector is still at an early stage of development. To date no fracking has been carried out in efforts to tap shale gas or CBM resources in the state.

Despite the ban, the technique is believed to be mostly unnecessary in Victoria. Unlike New South Wales and Queensland, CBM resources in Victoria are comparatively shallow and easy to extract.

Lakes Oil, which recently signed an agreement with China's Sinopec to explore development options for its permits in the Gippsland basin, said its tight-gas rocks could be produced without fracking.

Other companies involved in unconventional gas exploration in the state include ExxonMobil, Ignite Energy Resources and Somerton Energy.

Victoria remains the only state in Australia with a moratorium on fracking.

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