Australia ships huge amounts of gas overseas, yet households and manufacturers on the east coast have faced soaring prices and warnings of shortfalls. Here’s how that happened, and what the Government is doing about it.
Natural gas is used to heat homes, cook, generate electricity and make products such as fertiliser, plastics, glass and bricks. It’s a major input for manufacturing.
Australia has huge gas reserves and is one of the world’s largest exporters of liquefied natural gas, or LNG, gas cooled into a liquid so it can be shipped. Most goes to Japan, China and South Korea.
Two gas markets
Australia effectively has two main gas markets.
Western Australia, which exports large amounts of LNG from the North West Shelf and other projects, has required exporters to set aside gas for local use since 2006.
The east coast market covers Queensland, New South Wales, Victoria, South Australia, Tasmania and the ACT. It had no such requirement.
The export boom
Between 2015 and 2016, three huge LNG plants opened at Gladstone in Queensland, to export gas from coal seam gas fields.
That linked the east coast to international prices for the first time. Producers could now sell overseas, and domestic prices rose to match. Some exporters also bought gas from the domestic market to meet their export contracts.
Domestic prices roughly tripled over several years and spiked further after Russia’s invasion of Ukraine in 2022. Several gas-intensive manufacturers closed or scaled back, and gas demand on the east coast has fallen.
Shortfall warnings
The Bass Strait gas fields off Victoria, which supplied the south-east for decades, are running down. The Australian Energy Market Operator has warned the east coast could face gas shortfalls later this decade, especially on cold winter days, unless new supply or import terminals are developed.
The reservation scheme
In May 2026, the Federal Government announced an East Coast Gas Reservation Scheme. From July 2027, LNG exporters will have to make 20% of their export volumes available to domestic buyers, with exemptions for gas already committed under existing contracts. The details are still to be legislated.
The Government has also used price caps and a mandatory code of conduct for gas producers since 2022.
The debate
Producers argue the real problem is a lack of new supply, and that governments should approve more gas projects faster, and warn that intervention discourages investment.
Manufacturers and many economists have supported reservation as a way to make sure Australians can access their own gas at reasonable prices.
Environmental groups oppose new gas developments because of their greenhouse gas emissions, and argue the focus should be on electrifying homes and industry so less gas is needed.
Gas is also expected to play a role in backing up wind and solar power as coal stations close, which means demand from power stations could rise at times even as overall use falls.
