According to a report from the Australian Competition and Consumer Commission, LNG exports in future years may have to be diverted into the southern markets to avoid a gas shortage.

It its latest report on the gas market the ACCC said the supply from proved and probable, or 2P, reserves should be sufficient to meet demand across the east coast in 2022, but there was an expected shortfall of 10 petajoules forecast for the southern states. Queensland supply was likely to be called on to bridge the gap.

“The supply outlook in the southern states has deteriorated since the ACCC’s 2021 report, primarily as a result of gas from the Cooper Basin being redirected into Queensland,” the ACCC said.

“This has contributed to an improvement in the supply outlook in Queensland in 2022, but a projected shortfall in the south may put upward pressure on the prices paid for gas in the south.

“Beyond 2022, the long-term supply outlook remains tight and uncertain, with forecast production from 2P reserves not expected to be sufficient to meet domestic demand and long-term LNG export demand in the east coast from 2026.

“This is now the third year we have reported a reduction in production from forecast 2P reserves.

The ACCC also expressed concerns about the behaviour of the LNG projects and whether they were complying with an agreement made with the Federal Government to direct gas into the domestic market.

It said many domestic gas supply offers from LNG producers did not appear to have been internationally competitive.

It also said a significant gas shortfall would emerge from 2026 and this was due to the writedown in reserves by gas companies.

In Queensland, a shortfall in supply from 2P reserves was not expected to arise until 2028, which is one year earlier than was previously forecast.

“This acceleration also appears to have occurred as a result of delays in bringing new sources of supply online and the significant write-down of 2P reserves that have occurred, particularly in the fields controlled directly or indirectly by some of the LNG producers,” the ACCC said.

“The long-term supply outlook is less positive. The shortfall in the southern states is forecast to continue in 2023 and beyond, which is two years earlier than we previously forecast.

“Additional supply from an LNG import terminal in the south, or more domestic supply from the north will be required to address this shortfall. It may also be necessary to divert some gas into the domestic market that would otherwise be exported if new supply cannot be developed rapidly enough.

“While there are a number of new domestic sources of supply and LNG import projects that could potentially be brought online to address the projected shortfall, they are more speculative in nature and have not yet been sanctioned.

“Before they can be sanctioned, these projects will need to overcome a range of barriers, and significant investment in infrastructure will be required to bring the gas to market.

“In the east coast more generally, a shortfall in supply from 2P reserves is expected to emerge from 2026. This has been driven, in part, by a further writedown of 2P reserves, with reserves written down by around 1117 PJ in the 12 months to 30 June 2021.

“This is the fourth year we have reported significant write downs, with 2P reserves having been written down by around 8955 PJ ( about 21 per cent) since 2017, the majority of which have been written down by LNG producers in Queensland.”