Natural gas is an important energy source for Australian households, businesses and industries.
Since the 1960s, Australia’s south-eastern states have received much of their supply from gas sources in the Gippsland and Otway Basins, which sit in Bass Strait off the coast of Victoria. However, it isn’t widely recognised that these gas reserves are now in decline, and production from the region’s ageing gas field projects is falling.
The Australian Energy Market Operator (AEMO) acknowledged this declining supply in its 2020 Gas Statement of Opportunities.
“Several gas fields are forecast to cease production sometime between mid-2023 and mid-2024. If production ceases earlier, this could create peak winter day supply gaps in Victoria in 2023.”
Reduced production from the southern reserves will mean greater reliance on gas from northern reserves in Queensland but their ability to supply the southern states is limited by pipeline infrastructure capacity and cost constraints.
Even if the gas could be physically transported to the southern states cost effectively, the bulk of the gas production from Queensland is already committed to LNG export contracts. Other sources of gas production in Western Australia are not directly available to south-eastern customers due to the absence of pipeline infrastructure connecting the east coast network.
This decline in supply has coincided with increased demand for gas from international markets causing domestic market prices to increase. Combined with declining gas production from southern reserves, this has resulted in higher and more volatile prices for Australian customers, reflecting competition for scarcer domestic gas supplies.