By Rob Wheals, Squadron Energy CEO
There’s a certain irony in the announcement of a government scheme that is meant to shore up gas supplies putting into doubt a project that could help deliver said supply.
Viva Energy may not proceed with its approved LNG terminal in Victoria due to the uncertainty caused by the Albanese government’s domestic gas reservation scheme, it shone a light on the flip side of supply – delivery.
Australia has spent a lot of time debating how much gas should be reserved for domestic use, and there will be no shortage of varied opinion as industry pores over the finer detail of the draft legislation released earlier this month.
But it is only part of the problem.
For gas users in NSW and Victoria, the practical question is simpler: can the gas actually get to them when they need it, and at a price that makes sense?
As the government finalises its domestic gas reservation scheme, it should make sure reserved gas can reach customers through any practical and commercially available route – not just existing pipelines. This is why LNG terminals need to be part of the discussion.
Southern Australia is becoming more dependent on gas from further north as local production declines. At the same time, demand is highly seasonal and can rise sharply in winter, particularly when cold weather coincides with greater demand from gas-fired generation.
“LNG shipping and regasification is competitive with pipeline delivery.”
We are already seeing the consequences.
In 2022, AEMO twice triggered the gas supply guarantee. In June 2024, it issued an east coast gas system risk or threat notice as southern storage was depleted rapidly and supply tightened.
Then in June 2025, a cold snap, low wind output and coal generator outages drove a surge in gas-fired generation in Victoria. In just five days, the state used more than 4.6 petajoules of gas for electricity generation – more than 80 per cent of AEMO’s central forecast for the entire year.
So while the market may appear adequately supplied across a full year, that can hide the real problem: the system is already being pushed hard during relatively short periods of winter peak demand.
Pipelines will remain essential. But the main pipeline bringing Queensland gas south is already reaching its limits.
Southbound flows on the South West Queensland Pipeline hit capacity during winter 2025 and are expected to do so again through the coming winters. Planned expansion from 2028 will provide more headroom, but it is quickly absorbed. From 2029, AEMO expects the pipeline to be at its flow limit around a quarter of the year.
We are already bumping against the ceiling. From 2029, we start spending much more time there.
The peak-day problem can also be substantial. AEMO has projected potential southern gas shortfalls of up to 583 terajoules in a single day. In one 2031 scenario, shortfalls occur on 20 of 23 days in June.
That is not simply a question of whether Australia has enough gas. It is whether enough gas can physically get to customers at the right time.
A virtual pipeline
LNG terminals provide another route.
They allow Australian gas from producing regions to be shipped around constrained north-south infrastructure and delivered directly into southern markets. In practical terms, they operate as a virtual pipeline, adding flexibility to a system that increasingly needs it, so there is a role for them to play in the success of the gas reservation scheme.
Pipelines can be efficient where large volumes move steadily and infrastructure is well utilised. But the economics change when customers need substantial firm capacity for winter peaks that may sit underused for much of the year.
LNG shipping and regasification is competitive with pipeline delivery. And where the alternative is paying for overbuilt pipeline capacity that is only heavily used for part of the year, LNG can offer a more flexible and cheaper way to meet peak demand.
The answer should not be to choose one technology over another.
Delivering the best outcome
The reservation scheme should be infrastructure-neutral and allow gas to reach Australian customers through whatever practical and commercially available route delivers the best outcome – pipelines, shipping and regasification, or a combination of them.
Pipeline constraints should not become an automatic reason to reduce domestic supply obligations where another viable delivery route exists.
The objective should be straightforward: get Australian gas to Australian customers reliably, competitively and at the lowest practical delivered cost.
That is what long-suffering gas buyers need from a national reservation scheme.
This article was originally published in the Australian Financial Review on 23 September 2026.