Summer gets hot and muggy on Queensland’s Curtis Island. Winter is too warm for frost to ever form. But all year round, metal pipes stretching out from the jetties here are running colder than the iciest temperatures in Antarctica. Since launching 10 years ago, Curtis Island’s three massive export terminals have been super-chilling natural gas down to minus 162 degrees, which turns it into a compact liquid that can be shipped overseas.
The projects – whose backers include Origin Energy, Shell, and Santos – have reshaped the energy industry and made Australia one of the top gas suppliers to the world. Last year, liquefied natural gas (LNG) sold to places like Japan, China, Taiwan, and Korea fetched Australia nearly $70 billion in export revenue. A decade on from the first foreign LNG tankers arriving in Queensland, though, millions of Australians are now confronting a threat that many find a bitter pill to swallow in a country still selling its gas overseas: supplies of the fuel are running dangerously low in NSW, Victoria, South Australia, and Tasmania, leaving local consumers at risk of winter shortages and soaring energy bills.
Australia’s populous south-east is facing a gas crisis within three years, the energy market operator said on Thursday as offshore fields in Bass Strait, which have long supplied most of our domestic gas for heating, cooking, electricity, and manufacturing, keep depleting, with scant new projects to replace them. While Queensland is a major LNG producer, there is limited pipeline capacity to transport its gas thousands of kilometres south to consumers in NSW and Victoria, authorities warn. In winter, when gas demand for home heating is highest, the north-south pipeline is typically full. Gas that’s produced at Western Australia’s LNG operations, meanwhile, has no way of being transported east.
Fearing they are out of time and other solutions, east-coast energy ministers have begun working on plans to kick-start Australia’s first LNG-import terminals, which, if they proceed, could bring gas into the south-eastern states from Queensland, WA, or even from overseas to avert the forecast shortfall in 2028-29. “That’s the quickest way – and probably really right now the only feasible option,” says Victorian Energy Minister Lily D’Ambrosio.
The south-east’s looming shortage of gas – a fossil fuel that burns more cleanly than coal but remains a significant source of planet-warming carbon dioxide and methane emissions – underscores a deepening challenge for governments that are having to balance goals to combat climate change with the need to shore up traditional energy for those who still depend on it. Consumers across the country are increasingly making the switch away from gas stoves and heaters to electric alternatives, aided by government schemes and policies banning gas hook-ups in new residential buildings. There are signs the shift is having an impact on improving gas availability: non-industrial gas use in Victoria has fallen 4.5 percent since 2023.
The Australian Energy Market Operator (AEMO) this week cited falling demand as one of the reasons why it had pushed back its warnings of temporary winter gas shortfalls by three years – from 2025 to 2028 – and the bigger threat of an annual east-coast deficit from 2028 to 2029. “The numbers are in – Victorian households are using less and less gas,” says Kat Lucas-Healey, an energy adviser at conservation group Environment Victoria, which advocates against the expansion of fossil fuels. “Together they have bought us all an extra year before shortfalls hit.”
Still, the transition is not happening fast enough to avert the need to boost supplies, warns AEMO chief executive Daniel Westerman. Output from gas fields in the southern states is on course to collapse by more than 30 percent by 2029, he says. “Production is falling faster than demand, reinforcing the need for investment in new supply,” Westerman says. AEMO is calling for a “combination of solutions”, including new gas drilling projects close to southern markets, expanding pipeline capacity to enable the flow of more gas to the south, increased storage capacity to hold gas for times of high demand, and the start-up of LNG import terminals.
Squadron Energy’s LNG terminal is striving to lock in long-term supply deals with customers. The most advanced plan to import LNG is the Port Kembla energy terminal, developed by Andrew and Nicola Forrest’s Squadron Energy, near Wollongong in NSW. Another is Viva Energy’s planned terminal at its Geelong oil refinery near Melbourne, which is undergoing assessment for environmental approval. Dutch storage company Vopak, meanwhile, has proposed a floating terminal in Port Phillip Bay, 19 kilometres offshore from Avalon, and Venice Energy is planning one in Port Adelaide.
Squadron’s terminal at Port Kembla is the only one to have completed construction, but it has so far been unable to lock in long-term supply deals with customers, such as gas retailers, that will be required to underpin its commercial launch. Energy giant AGL, which needs gas to supply its customers and to fuel its fleet of gas-fired power plants across the electricity grid, says LNG imports are needed to “future-proof” supplies as Bass Strait fields deplete. But AGL believes Victoria, with 2 million gas-using homes and businesses, is the best location for an import terminal to be built. “Ideally, an LNG import facility would be based in Victoria, to be close to customers and leverage existing pipelines and storage,” says Markus Brokhof, the company’s chief operating officer.
Given the speed and scale of declining Bass Strait gas production, and the long times it typically takes to explore and develop new gas fields, some see importing LNG as the only way to plug the fast-approaching gaps. “Even in our most optimistic scenario, LNG imports to Australia are looking like an inevitability,” says Kaushal Ramesh, vice president of gas research at consultancy Rystad Energy.
But not everyone in the gas industry agrees. With vast gas reserves in the north, and drilling programs in Queensland’s Surat Basin and the Northern Territory’s Beetaloo Sub-basin vying to unlock even more, energy infrastructure owner APA Group says expanding pipelines and boosting storage could avert the “disastrous” option of turning to LNG imports, which would further tie Australians to volatile swings in global prices. Adam Watson, chief executive and managing director of APA Group, says, “There is no shortage of supply domestically. It would be mind-blowing to think we would have to become dependent on LNG imports – and I think logic will prevail.”
APA has unveiled a five-year proposal to expand the gas pipeline grid and deliver a 24 percent increase in north-south transportation capacity. The idea has won the backing of major manufacturers that need gas for energy or as a raw material in their factories for making products such as bricks, steel, food, and glass. “Australia has plenty of gas; it’s just not always where you need it to be,” says Andrew Richards, chief executive of the Energy Users Association of Australia, whose members include Brickworks, BlueScope Steel, and Incitec Pivot.
Prospective LNG importers respond to this by pointing to forecasts that suggest global gas prices are likely to fall this decade when a wave of new LNG production from the United States and Qatar is expected to hit the market, increasing the likelihood of an oversupply. AEMO’s three-year delay to its winter gas shortfall warning, now forecast for 2028, is viewed as a win within the Albanese government as it heads into a federal election campaign in which Opposition Leader Peter Dutton is eager to focus on energy security.
Also, on Thursday, March 20, 2025, the government unveiled a new deal with the Origin Energy-backed Queensland LNG venture, Australia Pacific LNG, to direct an additional 40 petajoules of gas over four years to the domestic market – enough to fully supply the cooking and heating needs of 200,000 homes. Climate and Energy Minister Chris Bowen has slammed the Coalition’s record in government, which ended in 2022 with an AEMO forecast that east-coast gas supply would drop 25 percent between 2022 and 2026, while wholesale gas prices spiked from about $4 a gigajoule to more than $30 by the time it left office.
Opposition energy spokesman Ted O’Brien accuses the government of driving Australia into a gas crisis following a series of “reckless” interventions in the gas market and “ideological hostility” towards the fossil fuel. A key reason for AEMO’s delayed shortfall risk, the opposition points out, is the life extension of the giant Eraring coal-fired power station in NSW, which has cut near-term demand for gas-powered generation.
The oil and gas industry, meanwhile, remains frustrated at years of onerous red and green tape that it says is impeding investment in critical new gas supplies, including a moratorium on coal seam gas drilling in Victoria since 2012. “The long lead time for major energy projects means governments need to act,” says Australian Energy Producers chief Samantha McCulloch.
As the risk of shortfalls edges closer, state and federal energy ministers are becoming increasingly worried that talks between LNG terminal developers and prospective customers appear deadlocked, with neither party able to agree on price and terms. At a meeting this month, they tasked officials to draft legislation that could empower AEMO to potentially provide underwriting support for one or more of the planned terminals. “Serious commercial arrangements have to be put in place involving the gas producers, terminal operators, the big customers, and probably the government,” says Tony Wood, energy director at the Grattan Institute. “I think everybody recognizes that we’ve got to find a way to get these terminals working.”
