Australia’s gas networks are at a crossroads, facing pressures from climate commitments, supply security concerns, and evolving energy policies. This paper synthesises insights from the 2024 Gas Statement of Opportunities (GSOO), Future Gas Strategy Analytical Report, and Electricity and Gas Networks Performance Report to assess the future of Australia’s gas infrastructure. It examines demand forecasts, supply adequacy, economic considerations, and the role of emerging technologies in ensuring a reliable and sustainable transition.

1. Introduction

Australia’s natural gas industry has long been a cornerstone of the national energy landscape, providing heat and power to industries, businesses, and households. However, increasing climate commitments under the Paris Agreement and domestic net-zero targets by 2050 necessitate a major transformation of gas supply and use. This paper reviews the outlook for gas networks in Australia, evaluating supply-demand balances, economic implications, and the role of low-carbon alternatives.

2. The Role of Gas in Australia’s Energy Mix

Gas accounts for 27% of Australia’s total energy consumption and is particularly significant in power generation, industry, and exports (Future Gas Strategy Analytical Report). While domestic demand is forecast to decline due to electrification, international demand—particularly from Asia—remains uncertain, hinging on alternative energy adoption by key trading partners (2024 Gas Statement of Opportunities [GSOO]).

Australia’s domestic gas market is segmented into the East Coast Gas Market (ECGM) and Western Australia (WA) Gas Market, each facing distinct supply and pricing dynamics (2024 WA Gas Statement of Opportunities [WA GSOO]).

3. Demand Forecasts and Emerging Trends

3.1 Domestic Demand Outlook

Domestic gas consumption is projected to decline in residential, commercial, and some industrial sectors as policies encourage electrification. Victoria’s Gas Substitution Roadmap Update and similar policies in the ACT have restricted new gas connections (2024 Gas Statement of Opportunities [GSOO]).

However, industrial processes requiring high temperatures (>500°C), such as mineral processing, will continue relying on gas, at least in the medium term. Additionally, gas-powered generation (GPG) will play a critical peaking role in electricity markets, particularly as coal generation retires (Gas Demand Forecasting Methodology 2020).

3.2 Export Demand

Australia’s LNG contracts with Asian trading partners remain a key factor. Contracts expiring between 2030 and 2035 will determine long-term export viability, especially as Japan, South Korea, and China explore hydrogen and renewables (Future Gas Strategy Analytical Report).

4. Gas Supply Challenges and Opportunities

4.1 East Coast Supply Risks

The 2024 GSOO forecasts supply shortages in southern states from 2028 unless new production, pipeline expansions, or LNG import terminals are introduced (2024 Gas Statement of Opportunities [GSOO]). Key factors include:

• Declining production from legacy gas fields in Gippsland.
• Slow development of new fields due to regulatory hurdles.
• Limited underground storage capacity exacerbating winter peak shortages (Consultation Paper – Stage 2 of the Reliability and Supply Adequacy Framework).

4.2 Western Australia’s Gas Market

WA is projected to face supply gaps post-2030, driven by declining reserves and growing industrial demand. The state government’s updated Domestic Gas Policy mandates 15% of offshore LNG production be reserved for local use, yet challenges remain in balancing new project approvals with environmental targets (2024 WA GSOO Visual Overview).

5. Economic and Regulatory Considerations

5.1 Pricing Trends

Wholesale gas prices have increased significantly since 2021, driven by global supply constraints and domestic policy shifts. The 2024 Electricity and Gas Networks Performance Report highlights how price volatility affects industries and consumers, raising competitiveness concerns (2024 Electricity and Gas Networks Performance Report).

5.2 Investment Uncertainty

Long-term gas infrastructure investment faces hurdles due to:

• Regulatory risks: Changing state policies and national emissions targets.
• Market uncertainty: Potential decline in demand affecting infrastructure viability.
• Capital costs: High costs associated with LNG import terminals and new pipeline projects (2024 WA Gas Statement of Opportunities [WA GSOO]).

6. Future Pathways: Decarbonisation and Alternatives

6.1 Hydrogen and Biomethane

Hydrogen and biomethane are positioned as potential gas substitutes, yet challenges exist in scaling production and ensuring cost-competitiveness. The Future Gas Strategy Analytical Report suggests that green hydrogen will play a role post-2035, but cost parity with natural gas remains a barrier (Future Gas Strategy Analytical Report).

6.2 Electrification and Energy Storage

Electrification is progressing in residential and commercial heating, but industrial sectors require alternative low-carbon fuels. Battery storage and pumped hydro could displace some gas-fired electricity generation, but firming capacity for renewables remains a challenge (2024 Gas Statement of Opportunities [GSOO]).

7. Gas as a ‘Battery’ – An Evolving Role in Energy Systems

Just like a battery stores electricity for later use, gas can store energy in the form of reserves and be “released” when renewables can’t meet demand. This makes gas an essential stabilising force in an increasingly intermittent energy system. Gas-powered generation serves as backup during low wind and solar output periods, ensuring grid stability and preventing supply disruptions (2024 WA Gas Statement of Opportunities [WA GSOO]).

Moreover, underground gas storage facilities and LNG terminals function as large-scale energy reservoirs, allowing stored gas to be deployed on demand. This flexibility is critical to meeting peak energy needs and mitigating volatility in wholesale energy markets (2024 Electricity and Gas Networks Performance Report).

8. Conclusion

Australia’s gas sector is at a pivotal moment, balancing the need for energy security, affordability, and emissions reduction. While gas will continue to play a role in the transition, its long-term viability depends on policy settings, infrastructure investments, and the pace of electrification. Coordinated planning between governments, industry, and regulators is essential to managing this transition effectively.