Shrinking gas reserves raise questions about winter 2025 readiness, says ACCC
The ACCC says Australia will have less gas available by the end of March 2025, stoking concern about the state of the country’s energy grid.
Australia will have a smaller surplus of gas by the end of March 2025, the Australian Competition & Consumer Commission has predicted.
The ACCC said it expected a surplus of between 12 and 27 petajoules, significantly less than its previous forecast in June 2024 of 26PJ-35PJ.
The ACCC said the decline was driven by an increase in contracted exports as LNG producers transfer export cargoes between the domestic peak and off-peak gas demand periods.
Bringing forward export LNG cargoes theoretically would free up capacity to meet peak demand in winter, but a smaller surplus would dent the capacity of the eastern seaboard to replenish stockpiles, leaving the country vulnerable.
Australia’s eastern seaboard relies on gas particularly during winter, when demand spikes. Victoria is a major user of gas for residential heating, while the other eastern states are dependent on gas for so-called peaker electricity generation.
Insufficient gas supplies would result in wholesale gas and electricity prices rising, which would eventually flow through to household and business bills in 2026.
ACCC commissioner Anna Brakey acknowledged the uncertainty as she issued a thinly veiled warning.
“Reshaping plays an important role in ensuring that there is enough gas for the domestic market during peak-demand periods,” Ms Brakey said.
“However, export reshaping also leads to an increase or decrease in volumes of gas available to the domestic market at different times of the year.
“It is important that there is sufficient supply to meet demand throughout the year.”
The ACCC said Iona – Australia’s dominant gas storage facility, which plays a vital role in supplying Victoria – required 15PJ of gas to refill in the lead-up to winter. Ms Brakey said LNG exporters were finalising shipments now, but she stressed Iona could not be left short.
“LNG producers may need to commit uncontracted gas to the east coast market in early 2025 to mitigate the risk of a domestic gas shortfall during the 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 generation,” Ms Brakey said.
During peak periods the pipeline from Queensland, which directs LNG to the east coast, typically runs at full capacity and there is little to no scope to increase supplies.
Australia’s coal-fired power stations are increasingly unreliable as plants age, and any unexpected outages would increase the country’s use of gas.
That scenario played out in 2022 when household bills jumped more than 20 per cent.
The Australian Energy Market Operator has said the eastern seaboard may have to revert to burning diesel to produce electricity in 2026 and there is a significant risk to the stability of the system by 2028.
Australia’s energy industry has urged the government to fast-track new projects but the government insists it will not cut environmental corners. The apparent reluctance has stoked suspicion about the government’s commitment to the fuel source,
Opposition energy spokesman Ted O’Brien said the outlook is due to Labor’s attitude towards gas.
“By demonising gas and forcing the premature closure of 24/7 baseload power stations, the Albanese government has placed our entire energy system on a knife’s edge,” Mr O’Brien said.
The mood among Australia’s gas industry darkened further when an international group, that had planned to conduct seismic testing to locate gas, said on Friday that it has abandoned the project.
Australian Energy Producers chief executive Samantha McCulloch said the announcement from seismic surveyor TGS demonstrated the increasingly difficult regulatory and investment environment in Australia, particularly in Victoria where new gas supply is most needed.
“Victoria is facing gas supply shortfalls from 2027 and already came close to running out of gas during peak periods this winter,” Ms McCulloch said.
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