Australian LNG imports counter domestic gas supply missteps

Australia is facing public fallout as it constructs as many as four new LNG import terminals along its east coast to cover pending gas supply shortfalls. LNG imports could begin as early as 2027, said a recent Reuters report, based on developments at import terminal projects along Australia’s east coast.

However, the question remains: Why would the world’s second largest LNG exporter, just behind the U.S., need to import the super-cooled fuel to keep the lights on? The answer is a mix of convoluted energy policies, decades of high export commitments, depleting southeastern gas fields, and geographic supply and demand mismatch.

Most of Australia’s large gas reserves are in the northwest, but most of its population and industrial demand is in southeastern states like New South Wales (NSW) and Victoria. Added to the quandary, it’s expensive and impractical to build and maintain pipelines that stretch thousands of kilometres across the continent to connect supply and demand centres.

Throw in a divided public over the best way forward and Australia’s energy sector is now struggling to find its way. In 2024, 41% said of the public said that Australia’s target to transition to renewable energy was about right, according to a Lowy Institute poll. That presumably leaves more than 50% which still favour gas and other fossil fuels.

Pending power shortages

The Australian Energy Market Operator (AEMO) in its 2025 Gas Statement of Opportunities (GSOO) highlighted the risks of peak-day power shortfalls from 2028. It also warned of structural supply gaps emerging from 2029 in southern Australia (Victoria, NSW, Tasmania, and South Australia) if new supply or demand reduction doesn’t happen.

Moreover, an Institute for Energy Economics and Financial Analysis (IEEFA) report entitled “Delaying Eastern Australia’s Gas Crunch” found that output from legacy gas fields (offshore Victoria, Gippsland, Cooper) are declining faster than demand is falling. Demand in the southern states is expected to fall only around 7% between 2025-29, while supply from those fields will drop around 36%, it said.

These four states are most at risk of a supply crunch and are heavily interconnected in the National Electricity Market (NEM) so rely on the same pipeline corridors. They don’t have LNG export plants of their own, so as Gippsland/Cooper Basin output declines, they’re the ones facing the squeeze and looking at import terminals. The Gippsland Basin (offshore Victoria) and the Cooper Basin (onshore South Australia and Queensland) are two major Australian gas-producing regions.

Not only is Australia planning on utilising four LNG import terminals, but it’s also trying to extend the operational life of its existing gas fields. On September 12th, Canberra gave final approval for Perth-based Woodside Energy to continue operating the North West Shelf gas project in Western Australia  (WA) until 2070. It’s the country’s oldest and second-largest LNG plant.

More than 6,500 LNG cargoes have been delivered from the project since it became operational in 1989. The project continues to deliver gas to both international and domestic markets, providing around 15% of WA’s gas needs. However, typical of the growing environmental pushback in the country, it took around seven years of approvals, appeals, backlash by environmental groups and other hurdles to get final government clearance.

Notably, the government did impose new rules to try to limit the project’s environmental impact. Australian Environment Minister Murray Watt said that Woodside had agreed to 48 conditions that were “technically feasible” but would protect the Indigenous Murujuga rock art in the area by limiting emissions.

The problem isn’t that Australia doesn’t have resources — it does. It’s the world’s second largest LNG exporter and the world’s second largest thermal coal exporter after Indonesia. In 2024, Australia exported a record 82 million tonnes (mt) of LNG, surpassing 81.1 mt the previous year, according to domestic consultancy Energy Quest data. The output pushed Australia ahead of Qatar as the second largest LNG importer after the U.S.

Key Aussie LNG markets include China, Japan, South Korea, and Taiwan. While Australian LNG export volumes rose, export revenue was lower in 2024 (US$67.7 billion) compared to 2023 (US$74.3 billion) due to repressed global LNG prices.

Matter of priority

The issue is how to allocate these resources to keep providing electricity in Australia’s densely-populated urban centres. To date, that plan includes prioritising LNG exports over domestic gas usage, provoking backlash from a chorus of officials and analysts.

Richard Denniss, Executive Director at The Australia Institute, recently complained that gas exports “have meant Australian households and businesses have paid billions of dollars more for energy over the last decade … the more gas they export, the faster Australia’s gas reserves run out, the higher the energy bills.”

Queensland Senator Susan McDonald, opposition resources spokeswoman, said that “we prioritise exporting gas ahead of actually looking after Australian households and businesses.”

Simon Molyneux, managing director/CEO at Perth-based Molyneux Advisors, sees the problem from a different perspective. He told Gas Outlook that it’s “insane that a gas-rich country such as Australia should be importing gas. But, whatever needs to be done to keep the lights on.”

He placed much of the responsibility for the current dilemma on government officials. “When governments in the state and commonwealth restrict and ban development and exploration in their jurisdictions eventually existing resources run out. This is what is happening in eastern Australia,” he said.

Taking the argument a step further, Chevron CEO Mike Wirth recently warned that Australia is becoming “less attractive for LNG investment.” He cited tax reforms, environmental delays, and rising costs as the main culprits. He added that Chevron had cancelled plans to double its LNG processing capacity in WA as a result.

The interplay between legitimate consumer and industry energy needs, LNG exports, LNG imports, gas usage, gas pipeline development, politics and environmental concerns, will dictate Australia’s future energy playbook. However, just how this will play out and who will get the upper hand remains to be seen.

(Writing by Tim Daiss; editing by Sophie Davies)