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The energy market operator is warning that gas supply could run short as gas fields in Bass Strait are rapidly drying up.Credit:James Davies

Government policies to ban gas hook-ups in new residential buildings and encourage people to switch gas appliances to electric alternatives are successfully driving down long-term gas demand forecasts,but not fast enough to avert shortfalls,according to AEMO’s latest gas market forecasts to be published on Thursday.

ExxonMobil and Woodside’s 50-year-old Gippsland Basin gas fields inBass Strait have historically provided up to two-thirds of southern states’ gas demand,but are rapidly drying up. AEMO is now predicting seasonal deficits to emerge in southern markets of Victoria,NSW,South Australia and Tasmania from 2026 – a year earlier than it had forecast in last year’s assessment – due to shrinking offshore production volumes and the planned closure of one of three gas plants at Longford in July.

By 2028,it warns,the entire east coast gas market will be in yearly supply deficits unless action is taken to drill new gas fields in the south,upgrade pipeline infrastructure or build special shipping terminals capable of importing liquefied gas (LNG) from other parts of Australia or overseas.

“While each individual investment could delay shortfalls for a number of years,a combination of these options will be needed to fully address gas supply issues,” AEMO chief executive Daniel Westerman said.

“From 2028,supply gaps will increase in size as Bass Strait production falls significantly.”

In Victoria,where more than 2 million homes and businesses still rely on gas,the state government is developing a program to encourage households to switch their gas-fired heaters,stoves and hot-water systems to electric alternatives,known as the “gas substitution road map”.

Conservation groups insist AEMO’s forecasts leave ample time for governments to make progress in the push to subdue demand through expanding electrification,but warn greater urgency is needed. Environment Victoria campaign manager Joy Toose said the forecasts underscored the grave risks of government leaders failing to move quickly enough.

“The Victorian government has made strong early steps to move away from polluting methane gas,but today’s report should be a warning about the costs of delay in electrifying households,including providing incentives to ensure the shift is fast and fair,leaving no one behind,” Toose said.

Australia is one of the world’s largest producers of gas,but massive volumes of production from Queensland’s gas fields are locked into long-term export contracts to LNG buyers in Asia,while gas produced in Western Australia cannot be transported to the eastern states.

The energy industry and large industrial customers that rely on gas for energy or as a feedstock are increasingly on edge about the threat of shortfalls,arguing developing more production fields located closer to the demand centres will be critical to ensuring gas keeps flowing to those that need it.

The federal and NSW governments have also set ambitious emissions-reduction targets,driven largely by swapping fossil fuel-based electricity generation for wind and solar farms,but have expressed support for new gas developments.

NSW Energy Minister Penny Sharpe said she remained open to development of Santos’ controversial Narrabri gas project,which has been mired in years of delays and lawsuits by environmentalists and landowners.

A spokesperson for federal Resources Minister Madeleine King said gas remained crucial to electricity supply and manufacturing,and the government had acted to bolster domestic supplies,including by striking agreements with Australia’s LNG exporters to guarantee local sales.

”The government is developing the ‘future gas strategy’ to outline a clear framework on the role of gas in Australia’s energy system in the medium and longer term,” the spokesperson said.

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