Article by Rick Wilkinson, courtesy of Financial Review
04.03.2025
The narrative is building that the Queensland LNG producers are sucking gas from eastern Australia domestic users and sending it overseas, causing a drain on gas for the southern states.
The Australian Competition and Consumer Commission recently released figures indicating that the LNG producers were net takers of gas, and this situation will worsen dramatically in the future.
It is easy to get lost in the fog of complex data and confidential commercial arrangements, so let’s focus on one piece of critical information. The only pipeline between Queensland and the southern states, the South West Queensland Pipeline (SWQP), flowed 3.7 petajoules south in 2024. It also flowed south at 9.6 petajoules in 2023. Queensland is a net supplier of gas to the southern states.
The gas flows south are small compared to the total east-coast domestic demand of about 500 petajoules, but this does not tell the whole story. Southern state gas demand, particularly in Victoria, grows substantially (triples) during winter as there are about 2 million households in Victoria that are connected to the gas network. These households use large volumes of gas for heating when it is cold.
During winter, the SWQP reaches capacity for the peak demand in the southern states, and no more Queensland gas can be diverted to the southern gas markets. Some additional gas could be sent outside peak demand periods when the pipeline is not full, but that gas needs to be stored somewhere, and gas storage capacity in southern states is also reaching its limits.
Southern states have historically relied on gas found offshore in the Bass Strait, which is administered by the Commonwealth government and its policy settings. In contrast, Queensland onshore gas fields are subject to that state’s administration and policies.
So how is the Queensland government going? The short answer based on the SWQP flows is that for the past two years, and at least for the next few years, Queensland produces enough gas for its own demand, LNG exports and has extra gas to send south during winter.
There is no gas shortfall in Queensland, and Queensland is not a drain on gas supply for southern states. Longer-term supply will depend on exploration successes and more development programs.
If Queensland LNG projects really are thought to be the cause of the east coast gas shortfalls, then an obvious option to consider is to close the pipeline from Queensland to the southern states. This would prevent Queensland from taking gas from southern states for export.
However, because Queensland is actually an exporter of gas to southern states, closing the pipeline would mean more gas in Queensland. Southern states would be unable to meet their winter gas demand requirements, resulting in cold showers on frosty mornings.
One area that can confuse matters is that there are contracts with the Cooper Basin in South Australia to supply gas to Queensland LNG, but these volumes are offset by coal seam gas fields in Queensland which flow in the opposite direction – this is why following actual pipeline flows is important.
Again, Queensland gas flows meet all Queensland gas demand including LNG exports – no drain here.