The East Coast Gas System

Australia's East Coast Gas System (ECGS) is an interconnected market and network of gas infrastructure spanning all states and territories except Western Australia. The system has undergone significant transformations over the past several decades, evolving from separate state-based systems into an integrated system for the east coast. The Australian Energy Market Operator (AEMO) now oversees the ECGS and has powers to monitor, signal, and manage gas supply shortfalls.

Officially, the ECGS consists of the:

• Declared Wholesale Gas Market (DWGM) in Victoria
• Short Term Trading Market (STTM) hubs in Sydney, Adelaide and Brisbane
• Gas Supply Hubs (GSH) where AEMO operates gas trading exchanges
• Gas industry facilities

History

Prior to the establishment of an inter-connected market, the east coast of Australia was serviced by four independent markets. These markets were based around major population centres and serviced by the world-class Gippsland and Cooper Basins, as well as the Roma Shelf, through regional infrastructure.

Numerous infrastructure buildouts since 1969 expanded upon the four distinct markets and eventually resulted in what we now call the East Coast Gas Market (illustrated in graphic below). A comprehensive list of these projects can be viewed in the adjacent graphic. The key developments that resulted in a fully integrated system were:

• Numerous pipeline developments in the early 2000s which connected South Australia and New South Wales with Victoria.
• The construction of the QSN Link/Ballera Moomba Pipeline in 2008, which connected Queensland to the Southern States.
• The completion of the Northern Gas Pipeline between Tennant Creek and Mt Isa in 2019, which connected the Northern Territory.

Another important development in the history of the ECGS was the rapid ramp-up of Queensland’s coal seam gas fields starting in the mid-2000s and the subsequent development of a Liquefied Natural Gas (LNG) export industry in the in the mid-2010s. These two developments significantly redefined the supply and demand landscape on the east coast and, with the construction of three export terminals on Curtis Island near Gladstone, linked the ECGS closely to the international market and its pricing dynamics.

Supply, Demand and Storage

The ECGS is subject to an intricate supply and demand story that balances producers and consumers across its constituent states and territories. A key dynamic of this market, and one which clearly distinguishes it from the National Electricity Market, is the physical nature of gas transportation. Gas must be extracted and moved, usually in pipelines, to areas where it can be utilised, and the exact volume that can be stored or moved through pipelines is a critical consideration.

Supply primarily comes from the major gas producing basins in Queensland (Surat-Bowen Basin), South Australia (Cooper Basin), Victoria (Gippsland Basin, Otway Basin) and the Northern Territory. This includes both on-shore, off-shore, conventional and unconventional operations. Historically, producers in Victoria’s Gippsland Basin were the dominant supplier into the East Coast Gas Market, however skyrocketing coal seam gas production out of Queensland’s Surat-Bowen Basin fundamentally changed that – it provided approximately 76% of all east coast gas in 2020. A lack of investment in, and government support for, gas exploration and production in the Gippsland Basin is likely to result in that trend continuing.

Numerous demand centres are on the receiving end of this supply. Australia’s major population centres – Sydney, Brisbane, Melbourne and Adelaide – and the gas-fired power stations that service them are significant consumers of the gas. Outside of residential power generation and gas usage, the key domestic users are food manufacturers (31%), mining and materials (29%), energy and chemicals (17%), and paper and packaging (9%). Queensland’s Curtis Island LNG export facilities also are a key, though nuanced, ‘consumer’. These facilities remove supply both through the volumes they export to international consumers, as well as through the energy energy-intensive process of converting natural gas into LNG.

An important supply and demand trend is the reversal of the historical norm of Victoria covering both its own demand and demand from NSW and then exporting to Queensland at specific times throughout the year (such as Summer). The decrease in production from Victoria now means that, moving forward from 2025, all exports to Queensland are likely to cease and instead Queensland will be feeding gas into the southern states all year round.

In addition to supply and demand sources are a range of storage facilities throughout the ECGS (Moomba, Roma, Silver Springs, Newcastle, Iona and Dendenong). The facilities, which have varying capacities, contribute to the system by flowing gas in our out depending on the wider supply and demand balance within the ECGS.

AEMO and the ECGS

AEMO operates and administers wholesale gas markets across the East Coast Gas System (ECGS) and manages the Gas Bulletin Board, which publishes data on gas production, flows, and system conditions across the east coast transmission network. AEMO also undertakes long-term planning and forecasting to support investment and policy decisions, including the Gas Statement of Opportunities (GSOO) and the Victorian Gas Planning Report (VGPR), which assess future gas supply, demand, and infrastructure adequacy.

Following concerns about potential gas supply shortfalls in southern Australia in 2023, governments expanded AEMO’s role through the ECGS reliability and supply adequacy framework. These reforms give AEMO additional powers to monitor supply risks, communicate potential shortfalls to market participants, direct industry participants if necessary, and trade gas to maintain system reliability. Together, these functions extend AEMO’s role from long-term forecasting to actively managing short- and medium-term gas supply risks across the east coast system.