Southeastern Australia natural gas shortages to continue for decades
Source: AEM0 2026 Gas Statement of Opportunities
The 2026 Gas Statement of Opportunities (GSOO) published by the Australian Energy Market Operator (AEMO) forecasts that the most populous southern regions of Australia (New South Wales, the Australian Capital Territory, Victoria, South Australia and Tasmania) are on track to experience substantial gas shortages from 2029 to beyond 2045, indicating a serious need for large new gas sources.
The 2026 GSOO forecasts gas shortfall risks during extreme peak day demand conditions from 2029 in southern Australia, with a need for additional supply in most scenarios from 2030. The 2026 GSOO goes on to say “Without ongoing investment, supply gaps are forecast in southern Australia from 2030 in most weather conditions as production continues to decline.”
In 2029 and later, despite falling forecast gas usage, annual supply gaps are forecast indicating a structural need for new gas supply beyond developments classified as committed and anticipated is necessary to maintain gas supply adequacy, as southern gas production continues to decline.
AEMO also forecasts gas shortages for LNG production, from early next decade
Not only is the eastern Australian domestic market supply-demand differential alarming, the forecast fall in gas available for LNG export is causing serious regional energy security concerns in the minds of existing, long standing buyers of eastern Australian LNG such as Korea, China and Japan.
Proposals that redirecting gas intended for export as LNG, under a Gas Reservation Scheme, to avert Australia’s impending east coast domestic gas shortfall are illusory. AEMO forecasts (based on data supplied by industry), as shown in the graph below, show, there is insufficient gas available to satisfy the forecast domestic from gas resources held by LNG producers.
More exploration is required to build gas reserves which can be used to meet the needs of the domestic and overseas LNG markets.
Source: AEM0 2026 Gas Statement of Opportunities
ACCC foresees more investment in gas supply is needed to meet future east coast demand
The June 2026 Australian Competition and Consumer Commission (ACCC) report entitled Gas Inquiry 2017-2030 - Interim update on east coast gas market states:
The most recent forecasts confirm that more investment will be required to meet long-term demand in the east coast.
Reducing barriers for new entrants and/or producers seeking to develop prospective resources would support a timelier increase in gas supply and promote greater competition in the market.
In the context of a proposed domestic gas reservation scheme and projected declining domestic demand, it is important that policies promote the most efficient sources of supply and infrastructure options.
So why is there an impending gas shortage?
AEMO forecasts substantial gas shortage from 2029
Petroleum exploration of Australia has shown us that the country is gas prone. There is a greater likelihood of finding gas than of finding oil.
When compared with other countries in the developed world, Australia is under-explored in terms of petroleum exploration drilling. The density of exploration wells in Australia, apart from where commercial discoveries have already been made, are sparsely drilled. Like the old saying “The harder I work, the luckier I get” in the petroleum business “The more wells I drill, (in new areas) the more new gas reservesI find”. Unfortunately, for a variety of reasons, petroleum exploration drilling has plummeted by 90% since 2009 nearly a decade and a half ago, according to the Australian Bureau of Statistics (ABS).
The APPEA 2020 Key Statistics report shows that from 2009 to 2015 the number of petroleum exploration wells fell by more than 90% (from 340 wells to about 30 wells)! Since then exploration drilling for new gas sources has languished. Unfortunately, this graph of Annual exploration well activity and expenditure is no longer produced by AEP (formerly APPEA).
More recent data from the Petroleum Exploration Society of Australia (PESA) 2025 Exploration Year in Review presented at the 2026 AEP Conference shows that:
In 2025 there was a slight increase in petroleum exploration expenditure despite drilling activity levels similar to previous years. The small expenditure increase possibly reflects industry cost increases.
In 2025 offshore expenditure exceeded onshore expenditure for the first time since 2019.
There is little correlation between petroleum exploration expenditure levels and commodity prices.
Acreage held under title by the industry has been on a steady decline for the past decade and is an early indicator that activity is unlikely to ick up, especially in new areas looking for new reserves.
Exploration drilling continues to be a the same low level since the massive decline that began in 2010 and bottomed out in 2016.
Offshore exploration drilling (only 5 wells in 2025) remains at about one fifth of the level of onshore exploration drilling.
Offshore the drilling success rate was 40% (2/5) and onshore drilling targeting conventional targets had a 50% (9/18) success rate.
Not surprisingly, this rather modest exploration drilling effort did not result in an 'exploration ‘breakthrough’ or major discoveries within a new exploration play.
Source: PESA - 2025 Exploration Year in Review
Source: PESA - 2025 Exploration Year in Review
Not only that, the few petroleum exploration wells that are being drilled are located in well established gas producing areas almost none are exploring new or sparsely explored parts of Australia, where large new gas reserves are more likely to be found. The map of Australia (left, below) from from the Commonwealth Government geological survey known as Geoscience Australia shows all the petroleum wells drilled in Australia, offshore and onshore. It is apparent that large parts of Australia are either undrilled or barely drilled. The middle map below (also from Geoscience Australia) shows that quite a number of wells have encountered hydrocarbons (petroleum) in areas outside the densely drilled areas where petroleum production has been established. Many of the areas where hydrocarbons have been encountered outside established production warrant further serious investigation. As the right hand map below shows (PESA Gazette of 8 July 2024), disappointingly current recent exploration drilling is still almost exclusively occurring in proven hydrocarbon producing provinces, where it is far less likely to make the major discoveries that will lead to large increases in Australia’s gas reserves.
Oil and Gas Wells Drilled Showing Petroleum Types Encountered
Source: Geoscience Australia
Exploration and Appraisal Wells Drilled in 2023
Source: PESA Gazette - 2023 Exploration and Appraisal Year in Review
The current debate in Australia regarding the allocation of a currently known about gas between east coast domestic needs and export has an underlying, unstated premise - that the amount of gas in Australia, especially in eastern Australia, is restricted to the gas reserves we have already identified. This unsound premise is directing public discussion, and shaping government policy, in unhelpful ways.