The Australian Government is committed to sustaining an economy underpinned by reliable, affordable and clean energy. In 2021–22, gas provided 27% of Australia’s energy needs. Production and domestic use of gas accounts for 24% of Australia’s total emissions. Australia will need gas into the future, including as a bridging fuel. We also need to manage the emissions from gas, while ensuring affordability and reliability of energy as we undergo our energy transition.
Through consultation, we heard concerns about the role of gas and its contribution to climate change. Ensuring we reach net zero while maintaining living standards, industrial capacity, robust environmental standards, regional energy security and meeting our commitments to our trading partners are imperatives for the Australian Government.
We cannot turn off Australia’s gas without significant adverse impacts on Australians and our region. Reducing supply without also reducing demand would put upward pressure on prices across the economy. This could lead to business closures and shortages of consumer goods and services. The food processing industry, for instance, relies heavily on gas. Manufacturing cement, bricks, glass products, nitrogen-based fertiliser and electric vehicle batteries all depend on a reliable and affordable supply of gas. Steel production is looking to gas to transition away from higher-emissions coal while developing new, net zero technology. Without GPG, the electricity grid would be unable to cope with peak electricity demand.
The detailed analysis underpinning this strategy shows that to meet net zero, gas consumption may increase in some parts of the Australian economy.
The role of gas is changing. Two factors will decide how quickly demand reduces:
- the development, scale-up and commerciality of renewables and low emission alternatives to gas, such as hydrogen or biomethane
- the development and commercialisation of new, net zero technology for industrial applications.
Consultation responses made it clear that both low-emission gases and technology transformation are necessary elements of the pathway to net zero. However, the development pathways for both are just beginning. Success in the long term will depend on supply chain development and cost competitiveness.
Australian gas will continue to be required, not only by us, but by our trading partners. International investment in Australia’s LNG industry exceeded $398 billion between 2010 and 2022. The associated long-term offtake agreements mean that we export around 73% of Australian gas production as LNG. The level of investment required to create the large-scale projects that underpin Australia’s LNG industry is far greater than our domestic gas demand can support. Australia’s export percentage is likely to stay relatively consistent until 2035 due to long-term contracts. The ratio of exports to domestic consumption may change, based on changes in technology and the scaling up of alternatives. However, we will need further investment to support both domestic and export consumption. Arguments that Australia could divert gas developed for export fail to recognise the domestic gas market’s reliance on supply from gas export projects, the nature of Australia’s trade and investment relationships and the role of Australian gas in our trade partners decarbonisation pathways.
Emissions must be eliminated where possible and reduced where they cannot be eliminated. Gas emissions reduction strategies will be considered through the 6 sectoral plans which are being developed as part of Australia’s Net Zero Plan. Over 97% of Australia’s trade also goes to partners with net zero targets and new clean energy export industries will be important to Australia’s long-term trading relationships and prosperity.
Read Section 1 of the analytical report for background on global and Australian gas markets, Section 2 for analysis of emissions from supply and use of gas, Section 3 of the analytical report for analysis of the domestic demand outlook, Section 4 for the international demand outlook, and Section 7 for options to close the supply gap.