Shortfalls in Australia’s East Coast gas markets force regulators to make tough choices. Price caps, while offering short-term consumer relief, risk to undermine project economics and deter investment in future supply.
“Recent exemptions have effectively set a floor price as market participants anchor prices to the cap, making the market less responsive to supply-demand signals,” said Daniel Toleman, Wood Mackenzie’s research director of global LNG.
Export diversion is another option to help boost domestic supply but risks damaging Australia’s reputation as a reliable LNG supplier. “Queensland LNG projects were approved without domestic obligations and rely on long-term contracts,” Toleman said, explaining: “Diverting exports would require major infrastructure upgrades, as southern markets face the brunt of the shortfall.”
Imports 'commercially challenging'
Importing LNG through floating storage and regasification units (FSRUs) is “technically feasible but commercially challenging,” analysts warn. Global demand for FSRUs has surged since the Russia-Ukraine conflict, making units scarce and costly. The government may need to underwrite the commercial risk of such infrastructure.
Moreover, importing LNG would expose Australia to volatile global prices. Domestic gas prices would align with international LNG costs plus regasification and transport charges — potentially far exceeding current netback pricing.
Analysts pledge investors to come forward. Unlocking new domestic gas supply is the most effective way to reduce emissions and lower energy prices in Australia, Wood Mackenzie argues. But this would require a shift in government policy and a willingness to make politically difficult decisions.
