By Paul Hemsley

The Victorian government has granted energy companies in the state more time to come up with bids for an $85 million tender to pipe natural gas to Murray River communities and other selected towns that were promised mains supplies during the last election campaign.

The extension to providers heads-off what was threatening to unfold as a supply side crisis where government funding went begging because of contractual and funding complexities that potentially left key areas earmarked for mains supply running on pre-filled cylinders.

According to Victorian Premier Denis Napthine, the extensions were granted so that companies can submit more “sophisticated” proposals on how way they now plan to address problems of a “complex commercial nature” in providing natural gas and infrastructure to remote areas.

The provision of mains gas in regional areas is burning issue for many communities and businesses because of a combination rising prices for both electricity and the cost delivering bottled gas to houses and businesses, including transport.

The Victorian government has claimed that energy companies had already shown a “strong interest” in the tender, but industry requested extensions on the 4th December 2013 deadline.

As a result, tenders from prospective energy companies will now be due in the first quarter of 2014.

Energy companies say they need the extra time to address complexities in plans to deliver natural gas to both nine towns on the state government’s priority list as well as a line-up of Murray River communities.

While the Murray River communities aren’t ‘prioritised’ by the state government, energy companies still have the option to including as many or as little of them as they like.

This situation creates a problem in the government’s evaluation process to select a tenderer because proposals from companies could exclude towns or areas that the government wants covered.

On top of that, companies bidding for the contract will also need to submit “extremely complex” designs for extensive gas reticulation networks within target towns.

The priority towns include Lakes Entrance, Invermay, Heathcote, Orbost, Warburton, Marong, Terang and Maldon, which are covered under the Victoria’s Regional Growth Fund for $55 million.

The Murray River communities have been allocated $30 million, including $15 million from the federal government and $15 million under the state’s  Regional Growth Fund.

The planned use of compressed natural gas (CNG) and liquefied natural gas (LNG) also adds to the complexity of the proposals because they have not yet been used on this scale apart from smaller projects in Western Australia and the Northern Territory.

The government has also stated that coal-seam gas will not be used because the existing reserves in the Bass Strait oil fields have almost 30 years’ worth of supply left.

Municipal Association of Victoria (MAV) President Bill McArthur said the delivery of natural gas to remote areas was a key electoral promise by the Victorian Coalition government because the price of liquid petroleum gas (LPG) in 100kg cylinders was too expensive for remote communities.

“Councils support the extension of natural gas to regional and rural townships and we welcome the state government’s announcement of extending the process,” Mr McArthur said.

As a result, the state government has moved to address this problem of expensive cylynders by delivering natural gas, which it claims costs “about a third of the price” of the bottled gas these communities are presently using.