ACCC warns winter gas shortfalls for southern states, reliance on Queensland supply to continue

Australia’s competition regulator has warned Australia’s east coast gas supply continues to be in decline, which means southern states including NSW, Victoria, South Australia and Tasmania will need to continue to reply on Queensland to counter shortages.

While the market has sufficient natural gas reserves to meet demand, new gas productions were not being brought online quickly enough to counter depleted traditional supply sources like the Gippsland Basin.

The findings were made in the Australian Competition and Consumer Commission’s interim report into the Gas Inquiry 2017-30, and forecasted “small shortfalls” of up to 16 petajoules in 2025 during the winter months where demand is “considerably higher”.

“As has occurred in recent years, gas demand in winter months will need to be met from gas transported from Queensland and drawn from storage facilities,” it said.

While supply forecasts have improved since the ACCC’s July update, the body urged state and federal governments to make it easier for new gas sources to enter the market.

“There are significant barriers to new supply arising from lengthy regulatory approval processes and legal hurdles, large upfront capital costs, an uncertain policy environment, as well as a lack of competition in upstream gas markets,” it said.

While forecasted supply is expected to exceed demand by 77PJ to 112PJ due to increased production in Queensland, prices still remained above pre-2022 levels, amid the energy crisis caused by coal-fired generator outages, domestic shortages and Russia’s invasion of Ukraine.

The report said this was due to international prices, a lack of “long-term contracting activity,” and the reliance of southern states on Queensland supplies.

However, it acknowledge prices have continued to fall since 2022, due to “lower international prices and increased availability of gas”.

Resources Minister Madeleine King welcomed the report findings, stating that a “secure, reliable and affordable” gas supply was vital to Australia’s renewable energy transition which will be anchored and firmed by gas and battery storage.

“This latest report from the ACCC shows we are securing the gas supply we need for a reliable east coast gas market,” she said.

“Since coming to office, the Albanese government has put an extra 600 petajoules of gas into the east coast market to keep downward pressure on prices.”