Australia's New South Wales (NSW) government will limit future gas exploration to existing priority areas while backing new domestic gas supply projects, as part of a strategy aimed at avoiding east coast gas shortages and maintaining energy security during the transition to net-zero.
The state's Future of Gas Statement released on 7 October confirmed no additional areas will be released for gas exploration beyond existing priority regions. The government has reaffirmed support for development including Santos' Narrabri Gas Project, the proposed Port Kembla LNG import terminal and the Bancannia and Pondie Range Troughs basin in western NSW to help bolster domestic supply and reduce reliance on interstate gas production.
The statement also backed the principle that gas produced in NSW should primarily serve domestic consumers, and the state will continue to work with the federal government on measures to boost domestic gas availability and reduce reliance on interstate supply.
The position aligns with the federal government's proposed Domestic Gas Reservation Bill, which would require LNG exporters to make up to 20pc of export volumes available to Australian consumers from 2028, subject to market and infrastructure constraints.
The Australian Energy Market Operator's (Aemo) latest Gas Statement of Opportunities (GSOO) forecasts annual gas supply shortfalls from 2030 and peak-day shortages from 2029, driven by declining production from southern Australian gas fields and constraints on transport and storage infrastructure across the east coast market.
The NSW government also highlighted the growing role of gas-fired generation in the state's electricity system as ageing coal-fired power stations retire. Gas-fired power stations currently account for around 10pc of NSW's gas demand, but this is forecast to more than double by 2034.
NSW currently has five gas-fired power stations with a combined capacity of 2.3GW, supplying around 2pc of the state's annual electricity generation.
Aemo forecasts NSW will require an additional 3.2GW of gas-powered firming capacity by 2037-38, with gas-fired generation projected to account for around 6.6pc of the state's electricity supply by 2038 under its 2026 Integrated System Plan (ISP) "central scenario" — which assumes a balanced energy transition under current policy and investment expectations.
Aemo forecasts Australia will need 17GW of gas-powered generation by 2050 to support the future electricity grid, up from less than 13GW currently.
While backing new gas supply, NSW said renewable gases would play an increasing role in decarbonising hard-to-abate sectors. The government's Renewable Gas Production Program provides up to A$40mn ($28mn) in co-funding for biomethane production facilities, while its Hydrogen Strategy includes up to A$3bn in incentives to support the development of a domestic green hydrogen industry. NSW said renewable fuels could meet around 15pc of industrial gas demand by 2035.
