Australia’s gas industry stands at a critical juncture as it braces for looming supply shortfalls, particularly on the east coast, with experts warning that the situation is more urgent than previously anticipated. The Australian Energy Market Operator (AEMO) recently revised its forecast in the 2025 gas statement of opportunities, pushing the risk of gas supply shortfalls in southern Australia from 2028 back to 2027. The Australian Competition and Consumer Commission (ACCC) has reinforced this warning, urging swift action to develop new gas production sources.
The declining supply is largely attributed to reductions in output from southern gas fields such as Bass Strait, a key supplier whose production is steadily falling. This decline is happening despite a projected reduction in national gas consumption, partly due to the delayed retirement of coal-fired power plants like Eraring, which lessens the immediate demand for gas-fired generation. However, these factors do not offset the structural deficit emerging as production capacity falls faster than consumption requirements.
Bridging this supply gap has been complicated by multiple factors including extensive environmental approval processes and uncertain government policy support for new domestic gas projects. The tension is heightened by the fact that a significant majority of Australia’s gas is locked into long-term liquefied natural gas (LNG) export contracts, mostly to Asian markets including Japan and South-East Asia. These contracts underpin Australia’s diplomatic relations and economic ties, making any calls to curtail exports highly contentious within both economic and political spheres.
In this context, energy infrastructure company APA Group has sounded a cautionary note against over-reliance on LNG imports to fill domestic shortfalls, an option that is progressively being considered. APA’s CEO, Adam Watson, highlighted the economic risks, noting that the Asian LNG spot price has recently been substantially higher—up to 80%—than the federal government’s capped wholesale gas price for Australia. He emphasised the need for regulatory and investment certainty to unlock the abundant yet untapped gas reserves in basins such as the Surat Basin, which holds over 10,000 petajoules of uncontracted gas resources.
Supporting this viewpoint, the Australian Pipelines and Gas Association (APGA) stressed the importance of bipartisan policy to stabilise the gas market and encourage investment. APGA CEO Steve Davies pointed to a 20% decline in industrial gas consumption since 2018, partly due to manufacturing downturns linked to energy uncertainty. He underscored the necessity of secure and stable energy supply as other nations bolster their own domestic industries to maintain competitiveness in a volatile global environment.
To address infrastructure challenges, APA Group has outlined plans for expanding gas transport capacity with initiatives including converting the Moomba to Sydney ethane pipeline for natural gas service and expanding their pipeline network to ensure reliable gas delivery to southern states. These projects are aligned with Australia’s Future Gas Strategy, which formally recognises the transitional role of gas in the nation’s clean energy future.
At the same time, Australia is exploring LNG import infrastructure to mitigate the immediate risk of shortages. Four LNG import terminals are under development along the east coast—at Port Kembla in New South Wales, Outer Harbor in Port Adelaide, Geelong in Victoria, and the Victorian Energy Terminal in Port Phillip Bay. These floating storage and regasification units (FSRUs) are designed to bolster energy security by providing additional supply flexibility in the medium term.
Despite these efforts, gas producers have endorsed government strategies that aim to boost domestic gas development, though they warn that supply constraints will persist well into the decade unless production is accelerated. The complex interplay of environmental, commercial, diplomatic, and policy considerations means that the path forward remains fraught with challenges.
In summary, Australia’s gas sector is navigating a precarious crossroads. The country confronts an urgent need to ramp up domestic gas production to avert costly reliance on imports and secure a resilient energy future. Whether it can successfully streamline approvals, enact supportive policies, and expedite infrastructure investments will determine if Australia’s reputation as a leading gas producer endures amid shifting domestic and global dynamics.
Source: Noah Wire Services
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