Southern Australian households to face gas shortages from 2026 as most production set for export

<span>The Australian Energy Market Operator says Australia’s south-eastern states could face gas shortages as Bass Strait production declines.</span><span>Photograph: Horizon International Images/Alamy</span>
The Australian Energy Market Operator says Australia’s south-eastern states could face gas shortages as Bass Strait production declines.Photograph: Horizon International Images/Alamy

Southern Australia could face gas shortages during “extreme peak demand days” from 2025 as Bass Strait supplies dwindle, the Australian Energy Market Operator said.

In its annual gas statement of opportunities report, the Aemo said “small seasonal supply gaps” may emerge from 2026 with the shortages becoming annual ones from 2028 unless additional supplies are developed. Regions affected include New South Wales, Victoria, South Australia, Tasmania and the ACT.

Aemo said although the forecast gap has been delayed a couple of years because more households were ditching the fossil fuel.

A year ago, the Aemo warned of gas shortage risks “from winter 2023”. Shortfalls, though, were avoided as a “record mild winter” resulted in “significantly lower” gas demand. High prices and “early signs of increased electrification” also cut consumption.

Still, with two-thirds of east coast gas production earmarked for exports, mostly from Queensland, domestic demand will have to decline at a faster rate to avoid gaps in later years. Alternatively, more supplies will be needed or more gas piped southwards.

Southern fields produced about 1,500 petajoules of gas in 2022, a tally that will drop to about 1,200Pj this year and roughly 700Pj by 2028. For Victoria, the total available gas supply will drop by 48% over the outlook period, from 297Pj in 2024 to 154Pj in 2028, according to a separate Aemo report on the state also released on Thursday.

The chief executive of the Aemo, Daniel Westerman, said gas-fired power plants could get “temporary relief” by burning liquid fuels such as diesel.

“From 2028, supply gaps will increase in size as Bass Strait production falls significantly,” he said, noting the offshore fields had historically supplied two-thirds of southern Australia’s gas.

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Gas shortage forecasts have been a feature of the annual Aemo reports for the past decade, with the market operator seeking to identify gaps that then get addressed.

Their emphasis has also typically been on supply issues rather than how demand might change both factors, in response to higher energy prices. Efforts to quicken the switch off gas – such as Victoria’s ban on new residential gas connections from the start of 2024 – may also drive down consumption faster than Aemo is presently predicting.

The federal energy minister, Chris Bowen, said changes to the gas security mechanism and the implementation of the mandatory code of conduct for gas producers will help ensure supplies.

Bowen, though, is familiar with the risks facing energy supplies. An early winter cold snap combined with gas shortages and a period of low wind and solar power to create a short-lived energy crisis soon after his government took office.

The latest Aemo report also noted that it was “critical” that all southern gas storage was full prior to winter and their depletion rates monitored to reduce shortfall risks: “In extreme cases where depletion is taking place at an accelerated rate, northern supply should be sourced to ensure depletion is minimised.”

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One swing factor could be the timing of the closure of the 2,880-megawatt Eraring coal-fired power plant. Should it extend beyond the scheduled date of August 2025, gas-fired power consumption could be 30% to 60% lower.

Gas demand is forecast to continue to decline, just not at the pace of falling output in the south. Residential gas consumption is expected drop more than two-thirds, or about 125Pj a year, 50Pj in 2043, the Aemo said.

Burning gas for electricity generation has also been on the skids since 2019, with the downward trend continuing until the early 2030s. At that point, demand should stabilise as gas-fired plants get called upon more to support variable renewable energy plants.

Liquefied natural gas producers control about 70% of known reserves in central and eastern Australia. Volumes of gas exported internationally via Curtis Island in Queensland represent about 70% of annual consumption in the east coast gas market, the Aemo said.