New gas production and supporting infrastructure is not being brought online fast enough despite natural gas playing a critical role in the energy transition, the ACCC's latest gas inquiry report has found.
While the short-term outlook for Australia's east coast gas market has slightly improved, with a surplus forecast in both 2025 and 2026, domestic gas supply is in structural decline and future investment is uncertain. The southern states are already facing seasonal shortfalls and are dependent on gas being transported from Queensland.
The southern states may need to import gas to meet demand beyond the short term. However, as previously stated by the ACCC, any importation of gas will not obviate the need to continue domestic gas production.
Ensuring continued domestic supply of gas will be important to limit risks to energy security on the east coast and market stability associated with reliance on international LNG markets.
"Our current projections indicate the potential for structural gas shortfalls on the east coast from 2027 unless supply increases or demand decreases," ACCC Commissioner Anna Brakey said.
"Currently, there are significant barriers to new domestic gas supply becoming available due to lengthy regulatory approval processes, large upfront capital costs, an uncertain policy environment, and a lack of competition in upstream gas markets."
"To improve the longer-term outlook, it is essential that measures are introduced that support efficient and timely investment on the east coast and, more broadly, an orderly transition of the electricity and gas markets" Ms Brakey said.
The report has recommended that the role of gas be made explicit in government planning for the energy transition to underpin market-led solutions to achieve energy security and support gas markets in the transition. One option to help achieve this would be development of a gas market system plan, similar to the Integrated System Plan for electricity, which would identify and coordinate planning for needed gas investments.
East coast gas surplus expected in 2025 and 2026
There is now estimated to be between 77 and 112 petajoules of surplus gas on the east coast in 2025. In 2026, the forecast surplus is between 54 and 99 petajoules.
The latest quarterly projections reflect the shifting of some contracted export volumes from the domestic peak to off-peak demand periods, as well as higher levels of gas production in Queensland.
These shifts are supported by gas swap arrangements, where LNG producers supply more gas to the domestic market to help meet peak gas demand in the winter months and purchase gas from the domestic market in other periods to meet their reshaped contracted export commitments.
"The latest projections for 2025 suggest that the east coast will be in surplus in each quarter next year, including in the winter months when demand for gas is typically at its highest," Ms Brakey said.
"While there is likely to be sufficient overall supply across the east coast in 2025, the southern states are projected to be in shortfall over the winter months and will continue to rely on gas from Queensland or from storage to meet peaks in demand."
Forecast east coast supply-demand balance in 2025 (PJ)
Source: ACCC analysis of data obtained from gas producers in July and October 2024 and of the domestic demand forecast (Step Change scenario and coal retirement delay sensitivity) from AEMO's 2024 GSOO.
Note: Totals may not sum due to rounding. The quantity required to meet long term LNG SPAs includes feed gas requirements (such as fuel) required to produce LNG. The GPG figures in this chart are based on the coal retirement delay sensitivity from AEMO's 2024 GSOO and so incorporate the effect of the extended operation of Eraring Power Station. Net withdrawals from storage reflect single party-owned storage facilities on the east coast, which can experience net withdrawals or net receipts each year. This differs from storage to meet seasonal shortfalls from third party accessible storage facilities, such as the Iona storage facility in Victoria, which are more likely to be filled and emptied throughout each year.
Improving market conditions lead to a decline in prices
Prices by gas producers and retailers have continued to fall since the energy crisis in 2022. The decrease in prices is likely to have been helped by lower international prices and increased availability of gas.
The prices offered by producers for 2025 supply fell by 2 per cent between January and June 2024 to $14.77 per gigajoule. The prices offered by retailers for 2025 supply also fell by 13 per cent over this period to $15.43 per gigajoule.
In the past 12 months, following a period of prolonged inactivity, several large gas producers received conditional Ministerial exemptions from the Gas Code's price rules and resumed making offers for supply in 2025-26.
Retailer selling practices need improvement
The latest report also includes findings from the ACCC's recent review of retailer behaviour, which focused on the retail supply of gas to commercial and industrial users over 2020 to 2024.
The review found that there is no evidence of a systemic problem in relation to retail pricing practices. However, the selling practices of some retailers, such as the giving of short offer validity periods and insufficient information on charges, terms and conditions, are continuing to fall short of what would be expected in a well-functioning retail market.
"Retailing is expected to become more challenging given projected supply shortfalls, infrastructure constraints, the energy transition, and regulatory and policy uncertainty," Ms Brakey said.
"There is also a risk that market conditions and competition could deteriorate again. In this context, the effects of poorer selling practices may be felt more acutely."
"To safeguard against this and promote further improvements in retailer practices, next year the ACCC will publish best practice guidance on retail selling practices."
"We will subsequently monitor retailers' uptake of this guidance in our future Gas Inquiry reports. We will also publish more information in these reports on the prices retailers are charging commercial and industrial users as well as the prices retailers are paying producers of gas," Ms Brakey said.
Background
In 2017, the Australian Government directed the ACCC to conduct a wide-ranging inquiry into the supply of and demand for natural gas in Australia, and to publish regular information on the supply and pricing of gas. The ACCC will conduct the inquiry until 2030.
The December 2024 gas inquiry report contains information on the supply and demand outlook in 2025 and 2026, and recent prices offered and agreed for supply. It also reports on the findings of the ACCC's review of gas retailer pricing and selling behaviour, and considers gas projects and policy settings in the context of longer-term concerns about gas sufficiency and security.
The ACCC's next report on the gas inquiry's supply-demand outlook will be published in March 2025.
