Victoria running out of gas supply faster than forecasted, new AEMO report shows

There are fears of an extreme risk of outages within the next four years, sparking criticism of the state government’s “mad ideology”.

Victoria is running out of gas faster than initially forecast prompting warnings of shortfalls and an extreme risk of outages within the next four years, according to a new Australian Energy Market Operator report.

New investment is urgently needed if gas supply is to keep up with demand and gas-powered electricity generation from 2028 – when Victoria would become a net importer of gas unless additional supply and storage projects are developed.

The energy grid is set to come under greater pressure with southern supply forecast to be slashed by almost half, coal-fired power stations retiring and more renewables coming online.

AEMO CEO Daniel Westerman said a combination of pipeline upgrades, new domestic supply including renewable gases and LNG import terminals would also be needed to plug the shortfalls because gas was an essential part of the future energy mix.

“From 2028, supply gaps will increase in size as Bass Strait production falls significantly,” Mr Westerman said.

“While the report identifies the need to deliver new infrastructure by 2026, running gas-powered generators on liquid fuels could provide temporary relief during periods of extremely high gas demand.”

New investment is urgently needed if gas supply is to keep up with demand and gas-powered electricity generation from 2028. Picture: AFP

Victoria’s total available gas supply is forecast to reduce by 48 per cent from 297 petajoules (PJ) in 2024 to 154 PJ in 2028.

At the same time, demand is expected to hit 187 PJ in 2024 and 176 PJ in 2028.

A fall in Gippsland Basin production and the closure of gas plants at Longford is behind the decline over the next two years, with the report warning this “increases the probability of outages”.

Tight supply on peak days from next winter is expected to leave a small margin “for even brief supply issues”, with any plant trips or equipment outages in Victoria at risk of causing a “gas load curtailment event”.

There is also a threat of small seasonal supply gaps from winter 2026, which AEMO says can be managed.

Industries such as brickworks and bakeries would be among the first required to cut their usage before households would be affected.

The closure of NSW’s Eraring coal-fired power station in August 2025 and Yallourn power station in 2028 is expected to drive greater gas-powered generation.

This is despite overall demand for gas declining due to warm weather, cost of living pressures and increased electrification.

On Thursday, Premier Jacinta Allan played down the concerns, saying Victoria had time between now and 2028 to secure “cheaper and cleaner” energy.

She said the reported shortage “underscores” the government’s push for homes and businesses to transition to all-electric.

Ms Allan, however, conceded that there was “going to need to be a continued role for gas”.

“That is the reality of what we operate here in Victoria,” she said.

“We know (electricity) not only provides a cheaper source of energy, it is also enabling important access to gas reserves being maintained for those households and businesses who need to continue to use it.”

Ms Allan said more work needed to be done to keep Australian gas flowing into Australian households, saying gas companies were “very much focused on exports and profits”.

She shrugged off concerns from Victorian Chamber of Commerce and Industry chief Paul Guerra that the government’s plan to move away from gas had left business owners wondering if Victoria was the place to be.

“If you want to be a Victorian business, if you’re a Victorian Business and you’re concerned about energy security, energy supply, and also having a cheaper source of energy, you’ll get that here in Victoria, most certainly not from South Australia or NSW,” she said.

“It is clear that more gas supply is required because the forecast decline in production is faster than the forecast decline in gas consumption,” the report states.

Meanwhile sttate opposition energy spokesman David Davis said the AEMO report showed Victoria was in real trouble because of the Labor government’s “mad ideology”.

“Gas shortages will create real risks that may impact on families and businesses,” he said.

“Prices have surged, reliability has plummeted and the mad gas ban being slapped on Victorians must be reversed.”

Originally published as Victoria running out of gas supply faster than forecasted, new AEMO report shows