By Nick Toscano
Woodside, the largest Australian oil and gas producer, says it is too late to prevent a blowout in energy bills after years of drilling restrictions have left the south-eastern states without enough new gas to offset dwindling supplies from Victoria’s Bass Strait.
While Queensland and Western Australia are exporters of liquefied natural gas (LNG) overseas, officials have been sounding the alarm that homes and businesses in Victoria, NSW and South Australia are heading for a domestic gas shortage within three years or sooner unless drastic measures are taken.
Woodside CEO Meg O’Neill speaking at the Melbourne Town Hall. Credit: Elke Meitzel
More Australians are moving to replace their gas appliances with electric alternatives, which is driving down forecast demand levels. But that shift is not happening fast enough to avert annual supply deficits expected from 2028, according to the Australian Energy Market Operator.
Woodside chief executive Meg O’Neill said proposals to build special shipping terminals along the eastern seaboard to enable imports of LNG from other Australian states or overseas, and convert them back into vapour, were among the only options remaining to plug the looming gaps in time.
“Gas imports are probably the lowest-hanging fruit,” said O’Neill, citing the time it takes to find new gas fields, gain necessary permitting and begin delivering additional supplies to consumers.
However, importing gas to Victoria or NSW in the form of super-chilled LNG would inevitably increase prices, she added.
“Just think about the physics – to make LNG you have to take gas, run it through a very, very big and complex piece of equipment to make it cold, put it on a ship and send it to a receiving terminal where it gets regasified,” she said.
“All of these steps cost money … adding to the cost to the consumer, so gas prices go up.”
O’Neill’s claims on Thursday drew criticism from Squadron Energy, developer of the Port Kembla LNG terminal in NSW, which said gas imports would fix the supply crisis and benefit consumers by boosting competition.
Squadron, owned by billionaires Andrew and Nicola Forrest, pointed to forecasts that the global LNG market would flip into surplus by 2028, when a wave of new projects comes onstream in the US and Qatar, putting downward pressure on prices.
“The Port Kembla Energy Terminal comes online in time for Australians to access forecast falls in the global LNG price,” a spokesman said.
“It’s great that the industry is finally acknowledging the east-coast domestic gas market is heading towards a shortfall, after years of denying the need for LNG imports,” he added.
South-eastern Australia’s looming shortage of gas – a major source of heat-trapping carbon dioxide and methane emissions – presents a challenge for state governments, which are being forced to balance efforts to combat climate change with the need to shore up traditional energy supplies.
Perth-based Woodside, whose fossil fuel production operations span Australia, Africa and the Americas, remains one of the biggest gas suppliers to Australia’s east-coast market through its stake in the giant Gippsland Basin oil and gas fields in Bass Strait.
The 50-year-old offshore gas fields, which Woodside jointly owns with US giant ExxonMobil, exclusively supplies the east-coast market, and have done so for decades, but are now drying up at a rapid rate.
A moratorium was placed on all onshore gas exploration and development in Victoria in 2012 by Denis Napthine’s Coalition government. The Victorian Labor government overturned the ban on conventional onshore gas drilling in 2020, but has kept the ban on coal seam gas extraction and fracking.
O’Neill said ideology had “stood in the way of sensible energy investment” and left Victoria running short of a fuel widely used for cooking, heating, electricity generation and manufacturing.
Fearing they are out of time and other options, Australia’s state and federal energy ministers agreed in December to develop a plan to kick-start LNG imports into Victoria, NSW or South Australia. This included seeking advice on potentially underwriting the launch of one or more LNG terminals.
Squadron’s Port Kembla terminal completed construction last year, but is yet to strike necessary offtake deals. In Victoria, Viva Energy is planning a terminal at the Geelong oil refinery, and Dutch storage company Vopak proposes a floating terminal in Port Phillip Bay.
Environmentalists argue against LNG terminals, and instead call for a greater focus on getting more homes off gas, and for more gas to be held back from export. Unlike in WA, Queensland LNG producers are not subject to reservation rules.
However, diverting more Queensland gas to southern states would not ease the extent of the supply crunch without special import terminals, experts say.
The north-south gas pipeline is already routinely at capacity during winter, and there is insufficient storage capacity in the south to store off-peak gas.
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