MELBOURNE, March 17 (Reuters) - Australia's Victoria state said on Tuesday it would lift a ban on onshore conventional gas drilling from 2021 as it looks to boost local gas supply, in a controversial move that came earlier than expected.
The state Labor government said it would introduce legislation on Tuesday to "allow for an orderly restart of onshore conventional gas exploration and development from 1 July 2021."
"The decision follows three years of detailed investigation by the Victorian Gas Program, which found an onshore conventional gas industry would not compromise the state's environmental and agricultural credentials," the government said in a statement.
The state barred onshore conventional drilling in 2014 and extended the moratorium in 2017 to June 2020, at the same time as it permanently banned fracking and all coal seam gas exploration.
Australia's main oil and gas lobby group and analysts who see gas as crucial for the transition to renewable energy welcomed the decision.
Victorian households and manufacturers are more heavily dependent on gas than in any other state and the Australian Energy Market Operator has forecast shortfalls in Victorian gas supply from 2024 if more supply is not developed.
"The government's decision to lift the moratorium is a step in the right direction to help ensure that Victoria continues to have ongoing supplies of natural gas into the future," Australian Petroleum Production and Exploration Association Chief Executive Andrew McConville said in a statement.
Green groups concerned about carbon emissions and climate change said the decision was a mistake.
"It's incredible that after our horror bushfire season any government would now encourage new fossil fuel projects," said Environment Victoria Chief Executive Jono La Nauze.
Explorer Lakes Oil LKO.AX , which has long waited to begin drilling in Victoria, was not immediately available to comment on the pending end to the drilling ban. Lakes Oil's shares have been suspended from trading since last October after it failed to file an annual report.