The commercial potential of Victoria’s onshore unconventional gas is unknown as CSG exploration is in its infancy, with no production operations currently in existence, though there are 16 exploration licences in the state that contemplate CSG, according to Taskforce.

The parts of Victoria with the highest potential for unconventional gas are the Gippsland and Otway basins, with tight gas near Seaspray in Gippsland, which is not yet being produced.

The government imposed a hold on approvals for new CSG exploration licences and hydraulic fracturing approvals for all existing mineral and petroleum tenures in August 2012 and this was subsequently extended until July 2015.

While a previous inquiry led by former federal minister Peter Reith recommended the moratorium be lifted, Victorian Energy Minister Lily D'Ambrosio said Reith’s report merely reflected how poorly the Coalition dealt with the issue of CSG. That review was done under Victoria’s previous Napthine government.

"It dealt with the issue in Victoria in a way that locked out the community and didn't interrogate the science," she said.

"Our process will be about getting confidence back into the way government operates and we will ensure that we have this inquiry done in a timely fashion that is robust and thorough.

"We want to get to the bottom of people's anxieties, and we want to make sure that the path forward on this matter is clear and is guided by the science."

Industry proponents assert that conventional gas resources are declining and Victoria's unconventional gas resources need to be defined and developed, and the Australian Petroleum Production and Exploration Association was furious at this latest move.

“Restrictions, bans, delays and inquiries do not represent the ‘immediate action’ called for by the 2013 Victorian Gas Market Taskforce to facilitate new supplies for the largest natural gas consuming state in Australia,” APPEA chief operating officer (Eastern Australia) Paul Fennelly said.

“The decision raises serious questions about whether Victoria is a state that truly welcomes investment in developing onshore gas supplies, regional economic growth, job creation and additional farming income that comes with it.”

APPEA urged the Victorian government to immediately lift its ban on natural gas exploration to at least determine what resources are potentially available.

“The well understood process of hydraulic fracturing should also be allowed to continue on projects with licence approvals in place,” Fennelly said.

“The government can already look to the vast body of science and best-industry practice that underpins successful onshore gas development in other parts of Australia and overseas.”

Fennelly pointed to Queensland’s CSG industry as a template for success.

“Queensland, for example, has safely developed natural gas from coal seams for almost 20 years and more than $60 billion is currently being invested in export projects that have created tens of thousands of jobs and will deliver economic benefits for decades to come,” he said.

He noted Victoria’s reticulated natural gas network supplies gas to more than 1.8 million households where it is typically used for cooking and heating.

The commercial and industrial sectors also rely heavily on natural gas and input for the manufacture of products such as chemicals, plastics, pharmaceuticals, fertilisers, paints, pesticides and cosmetics.

“To delay much-needed gas development decisions to mid-2016 is neglectful of the urgent need to secure Victoria’s gas supply as outlined by the Gas Market Taskforce,” Fennelly said.