Natural gas in Australia currently comes from two main sources:
conventional gas, trapped in underground rock formations called reservoirs
coal seam gas, found in coal deposits where it is held by water pressure
Gas producers extract the gas from wells and process it to prepare it for transmission and sale in domestic and overseas markets.
Around half of Australia’s gas production is currently sourced from offshore basins in Western Australia and the Northern Territory for export as liquefied natural gas (LNG). The level of exports will increase with the development of major LNG projects in Queensland and Western Australia.
Conventional natural gas in eastern Australia is currently produced in a number of fields in the Gippsland, Otway, Cooper, Bass and Surat-Bowen basins, while coal seam gas is produced in a number of fields in the Surat-Bowen and Sydney basins. This gas currently supplies domestic consumption. A significant amount of conventional gas for domestic consumption is also extracted from the Carnarvon basin in Western Australia.
The development of a gas export market on the east coast gas is likely to align domestic prices in the eastern gas market with prices in the international gas market. Upward pressure on prices would signal to producers that they should continue to invest in bringing additional supplies of gas to market. This may mean bringing forward investment in technologies to enable the economic development of unconventional gas resources, such as shale gas. It may also mean investment in upgrading infrastructure to expand the productive capability of existing gas fields.
Gas producers sell wholesale gas to electricity generators, other large gas users and energy retailers, who sell it to business and household consumers. While most wholesale gas is sold under bilateral contracts, the eastern gas market has developed some wholesale gas markets. For more go to Natural gas markets.
For more information on developments in the eastern gas market, go to the AEMC’s Gas Market Scoping Study.
For more information on Australia’s gas industry and gas markets, go to the AER’s State of the Energy Market reports.