By Mike Foley
East coast gas producers may be hit with a first-ever reservation scheme to boost crucial supplies of the fuel, the Albanese government has declared, as the consumer watchdog warns the nation’s eastern states could suffer a shortfall by the end of the year.
Energy Minister Chris Bowen on Monday announced a wide-ranging review of the gas market to report by the end of the year, which he said would “ensure Australian gas is available to Australian users at reasonable prices”.
Chris Bowen says it’s a “reasonable request” for Australians to have access to Australian gas.Credit: Alex Ellinghausen
“That’s a reasonable request by the Australian people and one that we will continue to work to deliver,” Bowen said.
Former opposition leader Peter Dutton shocked the gas industry when he released a plan to impose a reservation on LNG exporters before the May election. His policy was to charge companies for uncontracted gas supplies shipped overseas instead of being kept in Australia.
Bowen ridiculed Dutton’s plan at the time as a “dot point in a press release”, while on Monday he described his review as a “very substantial, methodical process”.
The Australian Competition and Consumer Commission released its six-monthly gas report on Monday, which once again found that ongoing structural supply shortfalls would hit in 2028.
It also warned that the supply balance had “deteriorated” since the end of last year and shortages could bite by December and throughout 2026 unless the east coast gas exporters in Queensland agreed to sell into NSW and Victoria, rather than exporting it to Asia as liquefied natural gas. Prices had fallen slightly but remain elevated since the 2022 global energy shock caused by Russia’s invasion of Ukraine.
Homes and businesses on the east coast are running short of gas for three reasons. The massive onshore fields in Queensland export a significant amount of their production to Asia, the pipeline that connects these fields to NSW and Victoria is already running at full capacity, and the 50-year-old gas fields in Bass Strait are fast running out of reserves, with barely any new projects to replace them.
Most of Queensland’s gas has been locked into long-term export deals since the industry built three massive hubs in Gladstone and began exports in 2015. This created a huge industry generating billions in royalties, but also linked the east coast market to international prices and competition.
Two of the state’s three LNG producers are also key domestic suppliers, accounting for 40 per cent of the east coast demand. But a key problem has been the failure of gas giant Santos’ Queensland fields to live up to expectations, spurring the company to fill their long-term supply deals by buying supply from other producers that would otherwise have been available to the domestic market.
Consumer advocates and companies that need the fuel to make products such as steel, cement, bricks, fertilisers and food have been demanding that the government impose export restrictions on the Queensland producers to boost domestic supply and lower prices.
Bowen said the terms of reference of his review, which he will oversee with Resources Minister Madeleine King, put the gas industry on notice.
The gas lobby group Australian Energy Producers drew the ire of the Albanese government when it did not campaign against Dutton’s unprecedented plan but continued to campaign against “green tape” regulations of the Albanese government.
Industry sources not willing to speak publicly said they believe Bowen and King may believe there is little political benefit in keeping the gas industry on side.
King told an industry conference last month that Australians were tired of seeing their “vast” gas resources exported overseas and that it was “unfair” for this to happen while prices continued to rise.
“The Australian gas industry should pay careful attention to public concern of rising gas prices and supply gaps,” King said.
Bowen and King’s Commonwealth Gas Market Review will combine three ongoing federal reports into existing measures that were put in place to divert Queensland gas exports to the domestic supply, with varying levels of success.
Western Australia has since 2006 required gas producers to reserve 15 per cent of their production for the domestic market. It is the only state with a reservation plan.
The opposition said in a statement that the government must “immediately release new gas acreages for exploration and fast-track approvals of gas projects”.
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