Do we have a sufficient supply of gas?

Verdict

Yes, Australia has enough gas to meet current domestic demand but… there are issues with how it’s allocated, priced and transported to where it’s needed, which could lead to supply issues in the future.

Analysis

There has been a lot of discussion about the Australian gas market in the lead up to the election and its role in ensuring that we have enough energy to power our nation as we transition to a clean energy system.

Some claim we don’t have enough gas and need to approve new gas projects to ensure enough supply for the future. Others suggest we have enough gas but need to be smarter with allocating it to ensure we get it to the right place at the right time so Australians pay lower energy prices and have a reliable supply.

Before we start, there are three things you need to understand:

When we refer to “gas”, we are referring to many different types of gas from different resources like coal seam gas, shale gas, tight gas, basin centred gas and in-situ gasification products¹. Conventional gas and coal seam gas remain our most important gas resources for energy generation and export.

The Australian gas market is broadly split into three groups:

South East states (Vic, NSW, SA, ACT): Who use a lot of gas and are facing a supply shortage.

Northern states (QLD, NT): They have more gas but export a lot of it overseas as liquefied natural gas (LNG).

Western Australia: Have plenty of gas, export a lot and have no easy way to move it to the east of Australia. They also have a reservation policy, but more on that later.

Gas companies are not required to keep any of the gas we produce for the east coast Australian market. They can often get higher prices by selling it to places like Japan, South Korea, or China.

This impacts the price we pay for gas in Australia because we compete with other countries, which is then influenced by other global factors. For example, when the Ukraine war began and Europe imposed sanctions on Russia’s gas, it meant there was more demand for gas from other countries, driving up the global price. This meant we paid a higher price in Australia.

In Western Australia, the state government has a policy that requires gas exporters operating in the state to reserve 15% of their gas for the local market. This policy has been in place since 2006 and is one reason why WA has lower gas prices than the rest of Australia.

Now that you know what gas is and how we manage it in Australia, let’s consider whether we have enough to meet our needs.

Gas shortages

As gas will play a small but important role as our energy system transitions to renewables, concerns over gas supplies are understandable.

In their report Gas Statement of Opportunities², the Australian Energy Market Operator (AEMO) acknowledged a declining demand for gas from households and businesses as we all start moving to electrify our homes. This has resulted in a delay in gas shortages on the East Coast, which were expected to start this year.

AEMO cautions that there will still be a risk of gas shortages starting around 2028 as several East Coast gas plants close. The next several years will remain uncertain as supply and demand for gas continues to change³.

Research suggests that production from Australia’s existing gas projects could meet our remaining gas needs for the next 60 years⁶.

Keep it for ourselves

As most of the gas produced in Australia is exported, there are debates over how to manage this better to ensure our domestic market is prioritised, and if we do, how much we keep for ourselves⁴.

This is why there is a lot of political debate about establishing a “federal gas reservation scheme” – a set limit for how much gas is kept for use in Australia. While this might seem like an easy solution, experts warn that if this were to become policy, there would be pushback from the gas industry, who will be concerned about losing money because they will be required to keep it for sale in Australia rather than sell it for a higher price on the international market⁵. Our key trading partners might also be concerned, as they rely on Australia’s gas supply for the reliability of their energy systems⁶.

Other experts also point out that gas plants are the largest gas users in Australia (see Figure1)⁴ and that by powering gas production with renewable energy, we could free up supply for domestic use without increasing gas production or creating a reservation scheme.

A graph showing the use of gas in Australia.

Figure one: Institute for Energy Economics and Financial Analysis Australian gas uses.

A domestic reservation policy could ensure this gas is used to avoid potential supply gaps, but the challenge is getting it to where it needs to be⁶.

Moving from here to there

One of the biggest issues we have with gas supply is getting it to the right place at the right time. While less gas is being produced and gas processing plants are closing in the southeastern states, there is plenty of gas in the northern and western states⁷.

But we are limited in how to transport the gas from north to south or west to east because of the availability and size of pipelines or import terminals⁸. We also need to increase the storage capacity in southern Australia, but this is expensive.

This ‘transport’ issue would need to be addressed if we were to rely solely on existing gas projects to meet the needs of households and businesses across the country.

Conclusion

Australia has enough gas to meet current domestic demand, but this is changing all of the time, given our move to electrify our homes and businesses. It’s also worth noting that even with enough gas and an effective strategy to use it right, it is still the most expensive form of current energy generation⁹. So whatever gas we do have, we need to use it less and less, as cheaper renewables and storage come online.

However, allocation, pricing, and transport challenges may lead to supply shortages in certain areas in the next few years.