An uneasy truce: a post-intervention gas market in Eastern Australia

We present our analysis of the East Coast fundamentals and our long-term gas price assumptions through 2033 in Wallumbilla and the southern states. The paper concludes that the market has a chance to return from the brink of dysfunction. The replacement of lower-cost legacy supply near demand centres with higher-cost coal seam gas (CSG) from a remote region in another state through limited infrastructure – or liquefied natural gas (LNG) imports – fundamentally signals higher prices even as domestic demand declines from 520 PJ in 2023 to 425 PJ in 2033 with possible intermittent increases during coal retirements. Added to the mix is long-term demand and policy uncertainty, the current era of monetary tightening and vanishing finance for fossil fuel projects. The relationship between East Coast gas producers in Australia and the federal government appears to have de-escalated following the inclusion of potential price cap exemptions in the recently released mandatory code of conduct for the domestic wholesale gas market. Gas remains a crucial long-term input in the manufacturing sector and will continue to support gas intensive industries if price alignment can be achieved, which is what will be needed to ensure the gas sector’s longevity in the energy transition. We also discuss the role of gas in the National Electricity Market which is headed for an increasingly chaotic coal exit, keeping gas extremely relevant to support system resilience.