Woodside, Esso gas discovery in Bass Strait offers hope of reprieve for east coast gas shortfall

A new gas find in the Bass Strait, which was presumed depleted, could potentially delay predicted shortfalls in east coast supplies and undercut the case for LNG imports.

The Bass Strait gas fields were once the powerhouse of Australia’s gas supply.

Woodside Energy and ExxonMobil’s local arm Esso have found new gas in the Bass Strait, offering a rare glimmer of hope for Australia’s beleaguered east coast energy market and buying sufficient time to find a possible policy solution to a shortage that could arrive as soon as next year.

The joint venture partners submitted revised reserve data revealing the discovery of about 92 petajoules of gas, the Australian Energy Market Operator confirmed. The find, while modest by historical standards, delivers a critical – albeit temporary – buffer to an increasingly tight market that is headed for deficit.

The discovery follows a $350m commitment by Woodside and Esso to new exploration and development activity in the region, which is often described as depleted.

Merryn York, executive general manager of system design at AEMO, said the operator required more information from the producers before it adjusted its thinking.

“We’re awaiting on further analysis from both parties to determine when the additional reserves could be produced and the impact this may have on other GBJV fields and projects,” Ms York said.

Although the new reserves are unlikely to resolve the structural imbalance between supply and demand besetting the eastern states, analysts say the discovery could delay anticipated shortfalls by up to two years. It also weakens the rationale for liquefied natural gas (LNG) import terminals, which had gained commercial and political traction amid worsening fears over domestic shortages.

“It is good news, but it won’t delay the inevitable,” one senior industry executive said. “If they can bring it to market in time, the shortfall could be pushed back a couple of years — but not much more.”

Esso, the lead operator for the facility, did not immediately respond to requests for comment on the discovery.

Squadron Energy is building the Port Kembla Energy Terminal.

However, industry sources said the gas was located in existing fields, making it more economically viable than greenfield exploration. They cautioned that further seismic and appraisal data would be required before determining when the gas could be brought to market.

The Bass Strait, once the powerhouse of Australia’s domestic gas supply, has been in long-term decline as legacy fields are exhausted.

Yet the find signals there may still be more value to extract from mature basins using advanced drilling and reprocessing techniques.

The ExxonMobil-Woodside joint venture has already announced plans to progressively scale down its Longford gas processing facility in Victoria as output falls. That closure is expected to mark the formal beginning of a shortfall on the east coast by 2029, according to present AEMO projections.

AEMO’s most recent Gas Statement of Opportunities document warned of supply gaps as early as 2026, driven by declining southern production and slow progress on new developments. That has fuelled renewed urgency around alternative supply solutions — including controversial LNG import projects.

Andrew Forrest’s Squadron Energy, which is backing the Port Kembla LNG import terminal in New South Wales, recently pushed back the expected start-up of the facility to 2027, acknowledging demand had yet to materialise.

A spokesman for Squadron said the discovery was well timed.

“It’s remarkable how quickly critics of LNG imports discover new gas when shortfalls loom. Relying on last-minute finds isn’t a plan, it's a gamble with our energy security,” the spokesman told The Australian.

“It doesn’t fix seasonal shortages, infrastructure gaps or east coast price volatility. And far from pushing prices up, LNG imports put downward pressure on domestic prices by increasing supply and competition.”

In Victoria, Viva Energy is spearheading a rival terminal project, targeting first LNG cargoes in 2028. While on an ambitious timeline, the company insists it can align its start-up with the tightening market forecast.

Critics of importing LNG argue the move will drive up domestic prices and undermine the viability of manufacturing industries, which are heavily reliant on affordable gas and often unable to substitute with renewables.

Victoria, the nation’s largest residential gas market, remains particularly exposed to a tightening supply picture.

Without fresh supply or material reductions in demand, AEMO warns southern states will become increasingly reliant on piped gas from Queensland — raising transportation costs and pressure on pipeline infrastructure.

Dwindling gas supplies also pose a challenge for the energy transition. Gas-fired peaking plants, which can quickly ramp up to support renewable generation during periods of low solar and wind output, are considered critical to grid reliability. Unlike coal plants, gas turbines can be switched on and off rapidly, offering the flexibility needed to balance variable renewables.

While a welcome boost to Australia’s domestic energy security, industry figures warned the discovery should not delay decisive action to secure future supply, whether through new gas developments or LNG import infrastructure.

“It could push back the warnings. But like the boy who cried wolf, there is eventually a wolf,” one energy executive said, speaking on the condition of anonymity.