Australia running risk of gas crunch next winter, warns ACCC

Homes and businesses in eastern Australia are running dangerously short of gas as supplies tighten ahead of next winter, prompting the consumer watchdog to launch an appeal for gas exporters to consider increasing deliveries to the local market instead of their customers overseas.

Despite Australia ranking as one of the world’s biggest natural gas shippers, homes and businesses in Australia’s most populous south-eastern states are heading for a gas shortage within as little as three years, warns the Australian Competition and Consumer Commission (ACCC).

Australia’s enduring reliance on gas has come into sharper focus as governments step up commitments to decarbonise.Credit: Getty Images

Surging demand on cold winter days – when many households crank up their heaters at once – could lead to shortages hitting even sooner, the watchdog says.

The ACCC’s warnings underscore a deepening challenge for state and federal political leaders who are being forced to balance efforts to slash emissions with the need to shore up traditional energy supplies for homes and businesses that depend on them. Governments are heeding the warnings, and are increasingly promoting projects to boost supplies of the fuel. In Victoria, Energy Minister Lily D’Ambrosio, who has overseen the country’s most aggressive plans to curb gas usage, recently shifted the state government’s tone on the future of the fuel, and opened the door to new projects to store gas in depleted reservoirs beneath the sea. The Albanese government on Friday awarded two permits to tap more offshore gas for the domestic market from Victoria’s Otway Basin.

While consumers in Victoria, NSW and South Australia have enough supply to meet expected levels of demand for the first quarter of 2025, the ACCC on Friday warned the projected surplus had fallen “significantly” since the last check in June.

This was largely because Queensland’s exporters of liquefied natural gas (LNG) had shifted the timing of some of their deliveries to Asia so more local gas could become available for winter.

The three Queensland LNG projects – Shell’s QCLNG joint venture, Origin Energy-backed APLNG and Santos’ GLNG – sell vast volumes of gas overseas, but are also key suppliers to the domestic market, where traditional supplies of the fuel from ageing offshore oil and gas fields are rapidly drying up without new sources to replace them.

The ACCC on Friday said the LNG producers may be required to set aside even more uncontracted gas for the domestic east coast market to refill gas storage facilities and “mitigate the risks of a shortfall” next year.

“In addition to helping to replenish gas stores, this gas would provide a buffer against any disruptions to production in the southern states and against higher than anticipated demand for gas-powered [electricity] generation,” ACCC commissioner Anna Brakey said.

While Australia ranks as one of the world’s biggest shippers of LNG behind the United States, local supplies in the south-east have been running dangerously low as output dwindles from the giant gas fields in Bass Strait that have supplied the local market for decades. Massive volumes of Queensland gas production are already locked into long-term export contracts, while pipeline limitations restrict how much gas can flow south on days of heavy winter heating demand, and gas from Western Australia cannot be transported east.

The Albanese government on Friday granted two new production permits to ASX-listed gas producer Beach Energy to bring more gas to the domestic market from the Artisan and La Bella gas fields in the Otway Basin off the Victorian coastline

“As Australia makes the transition to renewable energy, we need to ensure stable gas supply to the market,” the government said in a statement. “We need to keep downward pressure on prices, shore up energy security and keep the lights on as we move to net zero.”

However, the decision to green-light new gas projects has fuelled a new clash between Labor and the Greens, who argue that Australia must not develop any new sources of fossil fuels.

‘Peak demand shortfalls are what will turn the lights off and shut industry down, and they are likely to arrive sooner than annual shortfalls.’

Rick Wilkinson, EnergyQuest

“Labor has lost all climate credibility,” Greens leader Adam Bandt said.

“It’s 2024, the climate crisis is already smashing Australia and even worse is to come for our children, but Labor has already approved 26 new coal and gas projects and is now backing even more.”

Opposition energy spokesman Ted O’Brien said gas supplies were “dangerously tight” and more was needed as back-up power for wind and solar farms.

“Unplanned reductions in renewable energy, like the wind drought in [the second quarter of the year] saw wind generation fall by 20 per cent, makes gas even more important to fill the gaps,” he said.

Australia’s ongoing use of gas – a major source of carbon dioxide and methane emissions that are dangerously heating the planet – has come into sharper focus as governments step up commitments to decarbonise.

Policies banning gas hook-ups in new residential buildings and encouraging people to switch gas appliances to electric alternatives are successfully driving down long-term gas demand forecasts.

However, the Australian Energy Market Operator warns the shift is not happening fast enough to avert the threat of shortfalls for the fuel that remains widely used in heating, cooking, power and manufacturing.

In Victoria, the nation’s biggest gas-consuming state, Energy Minister Lily D’Ambrosio has shifted the government’s tone on the future role of gas as shortfalls loom, stressing that the fossil fuel will have an important, albeit limited, role in the transition from coal to cleaner energy. Earlier this month, she announced new laws to pave the way for offshore gas storage projects to be developed in Victoria, including in depleted gas reservoirs beneath the sea.

Rick Wilkinson, the head of Australian consultancy EnergyQuest, said the domestic gas market had “scraped through another winter”, but the outlook continued to deteriorate, with shortfalls increasingly likely unless new supply came online.

Despite authorities including the ACCC predicting annual shortfalls by 2027 or 2028, disruptions could emerge much sooner on days of extreme winter gas demand, he said.

“Peak demand shortfalls are what will turn the lights off and shut industry down, and they are likely to arrive sooner than annual shortfalls,” he said.

Industry representatives for Australia’s biggest oil and gas producers on Friday welcomed the government’s decision to award new offshore permits to Beach Energy, but cautioned more supply would be needed.

“Without further exploration and development, future gas shortfalls are almost inevitable,” Australian Energy Producers chief executive Samantha McCulloch said.

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