Recent discussions on how to address Australia’s east coast gas shortfall have blurred an important distinction – gas terminals are critical infrastructure that move and store gas, they are not the gas itself.
The east coast of Australia is facing a gas shortfall – not because we are running out of gas, but because we can’t reliably get it to where it is needed, when it is needed.
The Australian Energy Market Operator has warned that southern states face gas shortfalls from 2028. The key reasons for this are declining Bass Strait production together with infrastructure constraints from northern supply sources, exacerbated by peak winter demand – rather than solely a lack of gas reserves.
Gas terminals are distribution and storage infrastructure. They don’t discriminate between domestic gas and imported gas and they do not make the market or set the price of gas.
The number one issue we need to solve is how to get gas to NSW and Victoria to meet peak-day shortfalls, which are becoming more frequent, as well as address the forecast long-term structural market shortfalls.
East coast gas policy has focused more on solving for gas supply while underestimating logistic constraints. This has resulted in price spikes occurring during shortages even when gas is available elsewhere in the system.
We have seen this play out in practice. In recent winters, enforceable undertakings secured by the Federal Government required northern exporters to make gas available to the domestic market. But during peak demand, key pipelines into southern states were already operating at capacity. The gas existed on paper, but it was stranded by infrastructure constraints.
Without new delivery pathways, any policy – including gas reservation – risks repeating this mistake by reserving gas that cannot physically reach southern customers during winter peaks.
No one wants to see a repeat of the 2022 winter crisis, when wholesale prices surged above $40 per GJ, and emergency price caps and supply controls were imposed. That episode was a clear warning of what happens when capacity constraints collide with peak demand – and it remains a real risk if infrastructure bottlenecks are not addressed.
We shouldn’t be arguing over domestic versus imported gas. One gas molecule is the same as the next. The market can decide the cheapest source, and policy should focus on increasing supply and delivery options rather than constraining them or picking winners.
The key policy questions are straightforward: what is the lowest-cost and most efficient way to move gas to where demand is, when it’s needed, and how do we quickly ensure sufficient diversity of supply sources?
Gas terminals act as a virtual pipeline, allowing domestic gas to flow to southern demand centres cheaply and efficiently, while also providing flexible, storage-like capability that can respond quickly to cold snaps, generator outages and short, sharp demand spikes.
Gas reservation strengthens the case for terminals further, rather than undermining it.
A gas terminal in NSW, like Squadron’s existing facility in Port Kembla, can receive gas from Queensland, where any reservation scheme is likely to apply, and unlock access to domestic gas from the Northern Territory and Western Australia at scale for the first time.
It also provides access to global gas supply expected to be in surplus in coming years, introducing new abundant competitive sources that will place downward pressure on prices.
Together with Jemena’s reversal of the Eastern Gas Pipeline connecting NSW with Victoria, the Port Kembla terminal will move very large volumes of gas into NSW and Victoria during peak periods. This materially reduces exposure to winter shortfalls without requiring new multi-billion dollar long-distance pipelines that may only be used for a few weeks each year, driving up costs for consumers.
Opening up supply options in this way increases competition and delivers better outcomes for Australian businesses and households.
Jennie George (31 Jan) is right to say energy security is national security. The real risk is not that Australia will import gas, but that we fail to ensure gas can reach households and industry when it is needed most – and at an affordable price.
Gas terminals are a practical, efficient way to break transport bottlenecks, increase competition and reduce the likelihood of price spikes and emergency intervention. In that context, gas terminals should be seen not as a foe, but as a necessary friend.
Originally published in The Australian