The works would include a $20 million to $30 million project to drill a new well to increase gas storage capacity at the Lochard Energy-owned facility.

The facility has recently increased its storage capacity by 25 per cent which allows it to supply up to 30 per cent of the state's gas on peak winter days.

Lochard Energy chief executive officer Anthony Fowler said another expansion would allow the facility to increase that amount to 50 per cent a day within the next decade to help meet a demand that was growing faster than expected.

Mr Fowler said that to expand the plant's capacity from 480 terajoules per day to 570 a day, the company would need to invest about $100 million.

"Some of that will be through plant works including a compressor installation but also likely the drilling of a new well," he said.

The proposed new well, called Seamer, is located nearby, and the company hopes to get approval by the end of the year so drilling could start next year.

"It can be drilled off this site and connected into the existing processing plant facility," Mr Fowler said.

While the project had yet to be given the tick of approval by investors, Mr Fowler said it was the cheapest enhanced storage development opportunity in the state.

"It's required by the market, it's useful to our customers and we think we've got a good case to get it done," he said.

He said it was much more cost effective to store the gas in Victoria, rather than have it piped in from Queensland.

Drilling a new well would allow Iona to store up more gas when the demand was lower which would allow customers to get access to quicker and cheaper supply when demand was high, rather than relying on trying to draw gas from Queensland in peak times - a process that would significantly increase the wholesale price.

While he couldn't put a figure on how much it would save customers, he said storing gas was the cheapest way of meeting the demand in peak times.

"The Iona gas storage facility is in effect a big battery. It stores energy to supply into the system when supply and demand get tight," he said.

Gas at the Iona facility is stored underground in a large rock formation which is about four square kilometres in size.

The gas storage facility was built in the wake of the deadly Longford gas explosion 21 years ago, which severely affected the state's gas supplies for two weeks.

While the bulk of gas flowed from the Port Campbell site in winter, Mr Fowler said gas stores were also tapped into during summer - most recently to supply the Mortlake gas-fired power station when a storm tore down 500kV transmission lines cutting power and putting the future of the Portland Aluminium Smelter at risk.

"We played a small part in protecting the Portland smelter under those difficult conditions," he said.

Mr Fowler said the plant was also in discussions with a number of south-west bus companies about supplying renewable hydrogen within the next decade, but said the project was still "very much in its infancy".

"At some point in the next decade or two there will be a substantial role for hydrogen, particularly renewable-based hydrogen," he said.

Mr Fowler said the company was also looking into a battery storage project.

He said Victorians had relied on gas from the Gippsland basin through the Longford gas plant, but that was now in decline.

The plans were unveiled during a visit by state Resources Minister Jaclyn Symes.

Ms Symes said the underground gas storage involved injecting natural gas into porous sandstone reservoirs from where it can be retrieved when demand peaks, helping Victorians save on their energy bills.

"On Victoria's coldest days, demand for gas outstrips the amount being processed, so storage reservoirs are integral to ensure consistent and reliable supply," she said.

"Expanding underground storage and off-shore production will boost the reliability of gas supply in Victoria and reduce short-term price peaks, particularly during winter."

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