Australia Could Face Gas Shortages As Early As 2027: ACCC

Blue flames rise from the burner of a natural gas stove in Orange, Calif., June 11, 2003. (David McNew/Getty Images)

Australia is expected to experience gas shortages as early as 2027 if the country does not secure new supply sources, the consumer watchdog has warned.

On July 5, the Australian Competition and Consumer Commission (ACCC) released its latest gas inquiry report (pdf), providing a snapshot of the east coast gas market’s outlook in both the short and long term.

The report forecasted that there would be sufficient supply to meet demand in the short term.

Specifically, the ACCC estimated a gas surplus of between 69 and 110 petajoules for 2025 and a surplus of between 54 and 98 petajoules for 2026, depending on whether liquefied natural gas (LNG) producers exported all their uncontracted gas.

However, the consumer watchdog expects the supply and demand balance to reverse significantly in 2027.

“Forecasts indicate that the east coast gas market may experience gas supply shortfalls as early as 2027 unless new sources of supply are made available,” ACCC said.

“This predicted shortfall is likely to take place one year earlier than what previous reports have forecast, with the extended operation of Eraring Power Station improving the outlook for 2027 but not altering the fundamental trajectory of supply.”

The ACCC attributed the change in its forecasts to an increase in forecast gas consumption for power generation and a drop in forecast supply caused by delays in new gas projects and production problems in legacy gas fields.

In addition, the report found that southern states would have to rely on gas transported from Queensland in the coming years unless new supply sources were available.

Even with its gas surplus, Queensland would still require new supply sources by 2029, the ACCC added.

Urgent Need to Develop New Gas Sources

While the report did not consider additional volumes of gas that could be potentially produced under the Gas Market Code exemptions framework, it highlighted the urgent need for government action to address the forecasted gas shortages.

“Long term solutions to gas market shortfalls will require a range of policy and market responses,” the report said.

“Amongst these, there is an urgent need to develop new sources of gas production and supply.

“Ensuring efficient supply to the east coast market would also be supported by increased competition in upstream production.”

Meanwhile, Resources Minister Madeleine King said the government’s recent gas strategy would focus on improving the supply and affordability of gas in the medium term.

“Gas has an important role to play in our transition to net zero,” she said.

“The future gas strategy makes clear that we will need gas for some time yet to support renewable energy.”

A tourist photographs the gas production area at the Woodside operated North West Shelf Gas Venture in the north of Western Australia, on June 16, 2008. (Greg Wood/AFP via Getty Images)

Too Early to See the Impact of the Gas Market Code

At the same time, the ACCC said it was still early to assess the impact of the government’s intervention in the gas market in the past two years.

Following the surge in gas prices caused by Russia’s invasion of Ukraine, the Labor government introduced an emergency price cap on wholesale gas.

It also implemented a mandatory code of conduct for the gas sector, which came into effect in September 2023.

The code outlined requirements concerning negotiations and agreements to supply gas, as well as rules banning the supply of gas above the “reasonable price” determined by the ACCC.

At present, the reasonable wholesale price is set at $12 (US$8) per gigajoule.

The gas price cap caused a period of uncertainty in the sector and, at one point, made it impossible for some gas retailers to secure supply.

Some market experts also criticised the policy, saying that the price cap would hurt domestic energy supplies on the country’s east coast.

At the current stage, the ACCC said the role of the mandatory gas code was still unclear.

“Since the introduction of conditional exemptions from the Gas Market Code, there appears to have been an increase in the amount of gas being contracted between producers and buyers for supply in 2024 and 2025,” ACCC Commissioner Anna Brakey said.

“While the increase in contracting activity is a positive sign, more time is needed before we can see what impact the Gas Market Code is having on the operation of the gas market, including how suppliers are making their gas available to the market as well as engaging with gas buyers.”

However, the report noted the impact of the code on the availability of gas and market prices might be seen more clearly in the upcoming months.