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East Coast gas supply shortfall threatens reliability

04 Jun, 2025
East Coast gas supply shortfall threatens reliability



Australia’s East Coast gas market is heading toward a structural supply shortfall, with chronic shortages looming unless urgent action is taken, warns global consultancy Wood Mackenzie.

In its latest article, Dare to be bold: Australia’s East Coast gas market, Wood Mackenzie highlights that while gas demand remains robust, new supply is failing to keep pace due to a toxic mix of declining exploration, delayed investment, and complex policy settings that have eroded market confidence.

“Gas remains a critical part of Australia’s energy mix, particularly as the country speeds up its transition to renewables and retires coal,” said Daniel Toleman, research director of global LNG at Wood Mackenzie.

“However, recent policy interventions have disrupted market dynamics, creating a cycle of underinvestment that threatens the long-term affordability and reliability of gas supply.”

Wood Mackenzie’s analysis shows the East Coast will now face tight supply conditions each winter, with the risk of year-round shortages becoming increasingly likely early next decade.

Despite higher prices, few new supply or exploration projects are advancing, as regulatory hurdles and policy uncertainty deter investment.

The consultancy explores several policy options, each with significant trade-offs.

Price caps, while offering short-term relief, risk undermining project economics and deterring future supply.

“Recent exemptions have effectively set a floor price, as market participants anchor prices to the cap, making the market less responsive to supply-demand signals,” Toleman noted.

Export diversion could boost domestic supply but would damage Australia’s reputation as a reliable LNG supplier and require major infrastructure upgrades, particularly as southern states bear the brunt of shortages.

Importing LNG through floating storage and regasification units is technically feasible but commercially challenging, with global demand for such units surging since the Russia-Ukraine conflict, making them scarce and costly.

Moreover, importing LNG would expose Australia to volatile global prices, with domestic costs potentially far exceeding current netback pricing. Wood Mackenzie concludes that unlocking new domestic gas supply is the clearest path to reducing emissions and lowering energy prices, but this would require a significant shift in government policy and a willingness to make politically difficult decisions.

Without bold action, Australia’s East Coast faces a future of chronic gas shortages, threatening both affordability and reliability for households and industry.

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