Outage at Exxon’s Longford facility sparks east coast gas price surge

A production issue at ExxonMobil’s Gippsland facility sent gas prices to nearly $20/GJ, which will strain heavy users and the national market.

ExxonMobil’s Longford gas plant in Gippsland. Picture: Stuart McEvoy

Domestic gas prices on Australia’s east coast have risen sharply after a sudden outage at ExxonMobil’s Longford processing facility disrupted supply from the region’s most important gas hub.

ExxonMobil late on Wednesday informed customers of an unplanned shutdown at the Victorian plant, which processes gas from the Bass Strait fields operated jointly with Woodside Energy. The outage is believed to have slashed gas output from Longford by about 25 per cent, according to industry sources familiar with the situation.

ExxonMobil has indicated to the country’s energy market operator it expects to return production to normal levels on Thursday, but by Thursday afternoon – industry sources said public data indicated output had yet to return to capacity. Exxon has yet to reveal any details behind the cause of the outage, and industry sources said the failure to bolster supplies may indicate an issue that could take longer to resolve.

The impact of the outage was almost immediate. Spot gas prices soared to nearly $20 per gigajoule on Thursday morning, up from levels below $14/GJ earlier in the day, according to traders. It marks one of the steepest intraday price jumps since the winter energy crunch of 2022.

While bigger industrial users are largely insulated from spot market volatility through long-term supply contracts, the outage adds pressure to a tight winter gas market and raises questions about the resilience of Australia’s east coast energy system at a time of structural transition.

The Longford gas plant supplies the overwhelming majority of Victoria’s gas and is a key swing supplier for New South Wales and South Australia. While the scale and duration of the outage remain unclear, any sustained shortfall could ripple through the National Electricity Market (NEM), where gas-fired generators are increasingly called on to stabilise the grid amid falling coal power availability and intermittent renewable power.

The outage coincides with a spate of cold weather across the east coast, which typically increases demand for gas and electricity — though grid stability is buoyed by the availability of coal, which remains the dominant source of power but is increasingly unreliable due to ageing power stations.

The outage is also a reminder of the looming east coast gas shortfall and the importance of Longford – which is approaching the end of lifespan that is denting its reliability. The Australian Energy Market Operator (AEMO) has warned the country’s east coast will experience a supply shortfall from 2029 as Longford begins to deplete.

The Longford incident could reignite debate about east coast gas policy, with heavy users such as manufacturers warning their future is at risk from high prices. Those users of gas who purchase from the spot market will be experiencing substantial financial pressures. In 2022 after a domestic gas spike was triggered in large part by Russia’s invasion of Ukraine that triggered a global energy crunch, a series of manufacturers went under and electricity bills soared.

Proponents have urged the federal government and its state counterparts to move quickly to approve new sources of supply, but perceived delays have fostered scepticism about a lukewarm attitude of the federal government to gas.

As it struggles to unlock new supplies, the federal Labor government earlier this week flagged the prospect of a east coast gas reservation on new developments – mirroring that already in place on the west.