I’ve lost count of how many times I’ve written some version of this sentence: the east-coast gas supply question has been deferred, not solved. AEMO’s Gas Statement of Opportunities has flagged a seasonal shortfall risk for the southern states most winters since the exercise began, and most winters the shortfall hasn’t actually arrived, because someone found more LNG cargo diversion, or a cold snap didn’t quite land, or a Longford outage got fixed faster than feared. The pattern is starting to look less like good luck and more like a system that keeps borrowing against a date it hasn’t set yet. That date increasingly looks like winter 2028.
Agree on the units first, because this debate gets sloppy fast. East-coast gas demand isn’t one number. It’s industrial baseload, residential heating, and gas-fired electricity generation, and that third category is the volatile one. Gas generators in the NEM don’t run flat out; they run when wind and solar aren’t enough and batteries aren’t deep enough, which in southern winters is often a cold, still evening with the sun down by five. That’s exactly when LNG export contracts on Gladstone’s terminals are least flexible and domestic reservation mechanisms are most tested.
What AEMO’s own forecasting actually says #
The Gas Statement of Opportunities, published annually, has for several years now pointed to a southern states shortfall risk concentrated in Victoria, South Australia and Tasmania, worsening as Bass Strait fields deplete and as Victoria’s own onshore exploration settings stay conservative relative to historical production. The forecast risk window has moved around a bit year to year – sometimes it’s flagged as a 2027 problem, sometimes pushed to the early 2030s, which is less a sign AEMO doesn’t know what it’s doing and more a sign the inputs genuinely shift: a new Narrabri approval, a change in LNG netback pricing, a cold winter that draws down storage harder than modelled. Readers who want the primary document should go straight to AEMO’s published market reports rather than take any one year’s headline as gospel.
What hasn’t moved is the structural story underneath it. Bass Strait, which supplied the bulk of Victorian and Tasmanian gas for decades, is in terminal decline, not abruptly, but steadily, the way mature basins do. Nothing coming onshore in the southern states replaces that volume at anything like the pace it’s leaving. Queensland’s coal seam gas, mostly contracted to the three LNG trains at Gladstone, can backfill some of it, but that gas has to travel down pipelines with their own capacity constraints, and it competes with export commitments that were signed under long-term contracts predating most of this domestic anxiety.
Santos, Narrabri and the project that keeps being the answer #
Santos’s Narrabri project in northern NSW is the one piece of new domestic supply that consistently gets named as the fix, and I’ve covered the company’s position on it in Santos at the centre of the east-coast gas standoff. The short version there: approvals have moved, first gas timing has shifted more than once, and the project’s economics depend partly on how Moomba’s carbon capture infrastructure performs, which is its own unresolved variable. Even at full production, Narrabri on its own doesn’t erase a southern shortfall. It reduces it, which is a genuinely different claim and one worth being precise about.
The gas industry’s defenders have a fair point when they say this gets treated unevenly against renewables timelines, which also slip without equivalent scrutiny. I made that argument more fully in has the Australian gas industry been written off too early. But fairness cuts both ways. If a transmission project slipping two years gets called a crisis, a gas project slipping three deserves the same language, not a pass because the molecules are familiar.
Why firming keeps dragging gas back into the conversation #
Every time someone argues gas is a declining fuel on its way out of the system, the firming conversation drags it back in. I’ve written at length about what firming actually means in practice, in what ‘firming’ means and why gas keeps coming up, and the mechanical point stands: batteries are terrific at filling two-to-four-hour gaps and increasingly competitive against peaking gas on cost, per the detailed comparison in gas peakers versus big batteries. What batteries don’t yet do economically is cover a multi-day wind lull in a southern winter, the kind South Australia and Victoria have both experienced. For that duration, gas peakers or pumped hydro remain the practical options, and pumped hydro projects like Snowy 2.0 and Borumba are still years from full output.
That’s the awkward middle this sector sits in. Demand for gas as a baseload heating and industrial fuel is flat to gently declining. Demand for gas as a firming fuel for an increasingly renewable grid is, if anything, rising, at least through the 2030s. Both things are true at once, and most of the shouting in this debate comes from people picking one half and ignoring the other.
The reservation and pricing fights nobody’s resolved #
The federal government’s gas market code, introduced to cap east-coast prices and give the ACCC and the competition regulator more teeth, has changed the contracting environment without obviously changing the supply picture. Producers argue price caps discourage the investment needed to bring new fields on; critics of the producers argue the shortfall was always going to be managed through export restraint rather than new drilling. Both arguments have some truth and neither is the whole of it. The Queensland domestic gas reservation scheme is a live demonstration that mandated set-asides can work at the margin but don’t by themselves fix a basin in decline.
Victoria’s own policy settings matter more than most coverage credits them for. The state’s historical caution on onshore gas exploration, a moratorium that was partially lifted a few years back under tight conditions, means any new Victorian supply, if it arrives at all, arrives slowly and in volumes that won’t move the needle much against Bass Strait’s decline curve. That’s a state government choice, made for reasons that have nothing to do with gas market mechanics, and it’s one the market has to plan around rather than wish away.
Where this actually bites first #
If there’s a genuine stress point, it’s not a headline blackout – AEMO has intervention powers and a gas market operator mechanism precisely to avoid that outcome, directing supply and managing curtailment before things get to involuntary load shedding. The more likely bite is commercial: industrial gas users on flexible contracts facing price spikes during tight weeks, and gas-fired generators bidding into the NEM at prices that flow straight through to wholesale volatility, which I’ve covered separately in why wholesale electricity prices swing so violently. The shortfall, when it shows up, tends to show up in the bill and the spot price before it shows up in the physical gas flow.
My own read, and I’ll own this as a judgement rather than a fact: I think the industry’s warnings about 2028 are more credible than its warnings about previous years were, not because the industry has suddenly become more honest but because the underlying decline curve at Bass Strait is now close enough that modelling error matters less. Early warnings had years of buffer to absorb forecasting mistakes. This one doesn’t have much buffer left. That’s a different kind of claim to the recurring “the sky is falling” pitch gas producers have made before, and it deserves to be treated differently by policymakers who’ve understandably grown sceptical of supply-crisis framing after a decade of it not quite arriving on schedule.
What would actually change the trajectory #
Three things would meaningfully shift the 2028 picture, and none of them are mysteries. Narrabri reaching full production on something close to its current schedule would help meaningfully, if not completely. A faster build-out of long-duration storage, pumped hydro at Borumba or Snowy 2.0 actually hitting commissioning dates rather than sliding them, would reduce how hard the grid leans on gas peakers for multi-day firming. And genuine progress on transmission, particularly the interconnectors that let Victoria and South Australia share renewable surplus more efficiently, would reduce the number of hours gas needs to run at all, a point that connects directly to the delays I’ve covered in VNI West: a transmission line still arguing with a map. None of these are fast fixes. All of them are slower than the policy conversation currently admits.
I’ll declare an interest here, of sorts: I grew up near Fremantle, where the gas conversation is a different one entirely because the state runs its own isolated grid, and WA’s domestic reservation policy has kept its own supply picture far more comfortable than the eastern states’. It’s a useful natural experiment, and one the eastern states’ policymakers reference constantly without ever quite being willing to adopt the full mechanism. Make of that what you will.
Winter 2028 isn’t a prophecy. It’s a date by which several slow-moving trends (Bass Strait’s decline, Narrabri’s schedule, the pace of long-duration storage, and transmission build-out) converge closely enough that the margin for error AEMO has relied on for most of the past decade largely disappears. Whether that produces a genuine shortfall or another year of near-miss relief depends on decisions being made, or deferred, right now. The Australian Energy Regulator and the AEMC’s ongoing gas market reviews are the places to watch for early signs of which way it breaks.
– Tom Fitzgerald, Baseload & Fuels Correspondent
Photo by Alex Simpson on Unsplash