Lochard Energy has commenced early planning for the next phase of expansion at the Iona gas storage facility (IGSF) in Southwest Victoria.
The proposal, dubbed the Heytesbury Underground Gas Storage Project Phase 2 (HUGS2), aims to add at least five petajoules of additional underground storage capacity by the winter of 2029.
The move comes as energy market operators warn of potential supply shortfalls during peak winter periods as the nation transitions away from coal-fired power.
“As Australia’s energy system continues to transition, gas storage remains a vital source of flexibility and reliability – particularly as coal retires and renewable generation increases,” said Lochard Energy CEO, Tim Jessen.
“HUGS2 is about ensuring the market stays ahead of rising peak gas demand and system stress. Market bodies, including AEMO in their recent Gas Statement of Opportunities, continue to point to the need for more storage to support reliability, flexibility and energy security as we move to a renewables dominated energy system.”
The Iona facility is capable of supplying up to 45 per cent of Victoria’s peak daily winter demand.
While the shift to renewables remains the long-term goal, Lochard Energy argues that gas-powered generators are the firming backbone to balance electricity supply when renewables are not available.
The HUGS2 project is designed to ensure there is enough fast-start gas available to balance the grid during these periods of high stress.
Despite the ambitious plans, the company issued a warning regarding Victoria’s ageing infrastructure. While the initial HUGS expansion is on track for completion later this year, boosting delivery capacity to 615 terajoules per day, Jessen noted that the facility is outgrowing the South West Pipeline (SWP) that connects it to the rest of the state.
“As events during the winter of 2025 showed, withdrawals from Iona can be constrained on certain high-demand days due to pipeline limitations,” Jessen cautioned.
He urged the government and regulators to fast-track investment in the SWP, noting that pipeline expansions typically take years to deliver.
Without a firm commitment to upgrading the link, Lochard warns that the extra gas stored underground at Iona might not be able to reach Victorian households and businesses when they need it most.
“We’re ready to continue expanding Iona to meet growing demand, but timely investment in the South West Pipeline capacity that connects the IGSF to the Victorian market is essential to ensure the market can fully access that storage when it’s needed most.”