The east coast of Australia is facing natural gas shortages earlier than previously expected, the country’s competition watchdog has warned, noting the market could swing into a deficit as early as the fourth quarter of this year.
The government reacted to the report by saying it would consider setting up a „gas reservation” for the vulnerable states.
“The east coast gas supply outlook for 2025 and 2026 has deteriorated despite an easing in gas prices in the second half of 2024,” the Australian Competition and Consumer Commission wrote today.
Despite the decline, however, “prices continue to be higher than pre-2022 levels. Concerningly, supply into the domestic market has fallen since that time and gas is increasingly being sold on a short-term basis, posing challenges for gas users who need longer-term certainty for their businesses,” ACCC Commissioner Anna Brakey said.
The ACCC started sounding the alarm of a gas shortage last year, as most of the gas that is produced in Australia is directed to international markets under both long-term contracts and on the spot market.
However, southern Australian states are heavily reliant on the gas produced in Queensland, which earlier this year prompted the government to try and force producers to set aside a certain amount of the energy commodity for the domestic market. Big Oil immediately responded with warnings that this could discourage further investment in the country’s gas industry, which is necessary to boost supply for the future.
“Long-term solutions to gas market shortfalls will require a range of policy and market responses,” the ACCC said in its interim Gas Inquiry report in July last year. “Amongst these, there is an urgent need to develop new sources of gas production and supply.”
Developing these new sources of gas is easier said than done as Australian authorities bet big on a transition from hydrocarbons to wind and solar, boosting the amount of red tape—and the costs—for new energy exploration.
By Irina Slav for Oilprice.com
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