ACCC Warns of Gas Shortages in Australia’s Southern States, Imports Likely by 2027

Flames of a lit burner of a gas stove in Dortmund, western Germany, on Oct. 14, 2021. Ina Fassbender/AFP via Getty Images

Australia’s southern states may face “structural shortages” by 2027, potentially requiring imports to meet demand, according to the Australian Competition and Consumer Commission (ACCC).

Their new gas inquiry report (pdf) raises alarm about the risks of gas shortages in the next two years.

While the competition regulator forecasts a surplus in domestic gas supply for 2025 and 2026, it warns that the balance between supply and demand will reverse in 2027.

“Our current projections indicate the potential for structural gas shortfalls on the east coast from 2027 unless supply increases or demand decreases,” ACCC Commissioner Anna Brakey said.

Due to the shortages, the ACCC said southern states would have to import gas to meet demand beyond the short term.

However, the agency noted that importation was not a long-term solution, as continued domestic gas production was needed to ensure Australia’s energy security and reduce the risks associated with reliance on the international LNG (liquefied natural gas) market.

The ACCC also said the price of imported LNG will be higher than domestic gas, with significant implications for gas supply negotiations and gas price transparency.

Why Are There Gas Shortages?

While the ACCC said gas was an important energy source in Australia’s net zero transition, the agency noted that gas supply in the east coast market was declining.

“Traditional supply sources such as the Gippsland Basin, which have served the east coast market for decades at a relatively low cost, are rapidly depleting, and investment in new supply has been insufficient to replace them,” the report said.

“In the absence of new supply in the southern states to fill the gap, consumers will depend in the near term on gas transported from Queensland.

“As southern haul pipeline capacity becomes increasingly constrained, southern states will likely have to depend on imported liquefied natural gas.”

Another contributor to the gas shortages is the increasing demand for gas-powered generation as the National Energy Market’s energy mix moves from primarily baseload coal generation to intermittent renewable generation.

The ACCC forecast that gas-powered generation would account for over 55 percent of annual gas demand on the east coast between 2027 and 2030.

Despite increasing pressure on the domestic gas market, Brakey said many factors were preventing new gas supply.

“Currently, there are significant barriers to new domestic gas supply becoming available due to lengthy regulatory approval processes, large upfront capital costs, an uncertain policy environment, and a lack of competition in upstream gas markets,” she said.

How to Improve Gas Supply

The ACCC suggested the government reduce regulatory barriers to new gas investment so that companies could deliver new supplies in a timely manner.

In addition, it is advisable that the government explicitly make the role of gas clear in its planning for the energy transition to give confidence and incentive to investors.

“One option to help achieve this would be to develop a gas market system plan, similar to the Integrated System Plan for electricity, which would identify and coordinate needed gas investments,” the report said.

Opportunities for Domestic Gas Market Beyond 2030

The ACCC pointed out that a portion of the LNG export contracts on the east coast would expire by the mid-2030s and could free up significant amounts of gas for the domestic market.

“This creates opportunities to consider how domestic gas reserves could support east coast gas supply,” the report said.

The competition regulator also stated that some LNG exports were purchasing gas from third parties on the east coast to meet their contract commitments despite having sufficient reserves.

The ACCC suggested the government incentivise those exporters to develop their existing reserves so that extra gas supplies could be freed up for domestic use.