Victorian landowners who allow conventional gas exploration on their property will receive a 10 per cent share of royalties from the state government if the coalition wins the next election.
But bans on fracking - also known as unconventional gas exploration - will remain.
"We should allow gas explorations to begin, at least to look ... if it is found, this will provide farming communities with a direct financial benefit," Opposition Leader Matthew Guy told reporters on Monday.
He said allowing conventional drilling and exploration in Victoria would benefit energy users by opening up supply and reducing prices.
Landowners would be able to veto any company who wanted to drill on their land as part of the coalition plan and they would receive a 10 per cent share of government royalties from any gas sold.
Conventional gas exploration is currently not permitted in Victoria. A moratorium is in place until 2020.
Despite the ban on drilling, the state government is spending $42.5 million to research what gas supplies might be available.
But the coalition proposal to explore gas reserves put Victoria on "a slippery slope back to the introduction of fracking", acting Resources Minister Jacinta Allan said.
"We know that the Liberal party were dragged kicking and screaming to support (fracking) legislation," Ms Allan said.
"This announcement today is about opening the door for this sort of activity to be once again considered here."
Conventional gas exploration should only be put on the political agenda once "science and evidence-based" research occurred, Ms Allan said.
Shell Australia chairwoman Zoe Yujnovich welcomed the policy announcement and said it would drive down the cost of gas in Victoria.
"Producing gas close to where it is used reduces the need for transport, creates jobs in regional communities and, most importantly, brings down the cost of gas," she said in a statement.
The plan is also supported by the Victorian Chamber of Commerce and Industry.
"We have consistently called for political parties to listen and stop preventing exploration of Victoria's gas reserves," chief executive Mark Stone said.
But Chloe Aldenhoven of Friends of the Earth says communities are concerned about the effects of drilling across their regions.
"All the experts are telling us that the nature of the gas reserves in Victoria mean that they will all require fracking or unconventional techniques during their life span if they are to produce commercial quantities of gas," she said.
