Queensland’s opposition to gas reservation a threat to energy security

The Queensland government recently announced plans to use public-owned land to host oil storage facilities in an effort to boost energy security, but analysts are already questioning whether this approach will work. 

The plan is part of Queensland’s broader Fuel Security Plan to “protect from future shocks”. Amid the supply disruption stemming from the Iran crisis, it is understandable that the government would take steps to improve energy security. 

However, while quick to address concerns about oil supply, the Queensland government has not been so proactive on gas supply security, directly opposing the proposed gas reservation scheme. 

Specifically, the government has suggested that a reservation policy should not apply to existing projects (which would undermine its effectiveness). Queensland Natural Resources and Mines Minister Dale Last stated the government “won’t support an approach that penalises Queenslanders because of unscientific, ideological decisions down south”, and that “decisions made by the southern states have left Queensland carrying the load for the east coast gas market.”

Framing the reservation policy in this way ignores the benefits that Queenslanders are likely to receive from a reservation policy that quickly increases domestic supply and places downward pressure on gas prices. It also ignores that Queensland has actually been a net importer of gas from the southern states from 2017 to mid-2025 (albeit by a very small amount). 

LNG exports raise gas prices for Queensland households and industry

The development of Queensland’s liquefied natural gas (LNG) export sector linked the east coast gas market to international markets. The resulting influence of LNG prices, alongside a lack of competition and declining production from cheap legacy fields, has seen Queensland gas prices (in the Brisbane short-term trading market (STTM)) triple from 2014-15 to 2025-26 (YTD), becoming the highest in eastern Australia (Figure 1). 

Rising gas prices increased energy costs for a range of business and residential gas users. IEEFA estimates, using prices in the Brisbane STTM as a proxy for broader market pricing, that the costs of delivering gas to industrial users increased from AUD666 million in 2014-15 to more than AUD3 billion in 2023-24 — even as total gas consumption fell. 

Figure 1: Queensland gas prices and estimated total industrial gas bills 

^{Source: Department of Climate Change, Energy, the Environment and Water (DCCEEW), Australian Energy Statistics 2023-24; Australian Energy Regulator; IEEFA.}

The start of LNG exports from Queensland in 2015 drove a fall in gas use in all sectors other than the LNG export sector. Queensland’s overall gas demand has fallen only marginally, by about 5% since in 2015, due to a 340% increase in gas use by the gas sector. 

More recently, rising gas prices drove a 10% fall in demand in the three years to 2023-24, with lower gas use in the manufacturing and electricity sectors more than offsetting strong demand from the gas industry. 

Since 2014-15, gas consumption in Queensland’s manufacturing sector fell by 34%, from 89 to 58 petajoules (PJ) (Figure 2). This was in part due to the closure of the Gibson Island fertiliser plant in Brisbane, which resulted in the loss of 170 jobs (more than the estimated 130-140 people employed at Santos’s Gladstone LNG facility).

Figure 2: Gas demand trends by sector in Queensland, PJ

^{Source: DCCEEW, Australian Energy Statistics 2023-24.}

Gas consumption in Queensland’s electricity generation sector fell by 48%, or about 79PJ, over the nine years to 2023-24, with its share of the electricity mix falling from 17% in 2014 to just 5% in 2025. While this undoubtedly reflects increased competition from renewables, it likely also reflects increasing gas prices making gas less competitive in the electricity price stack. With gas prices being a key influence on electricity prices, it is likely that higher gas prices have contributed to higher electricity prices in Queensland in recent years.

Victoria is the main gas supplier in the south, not Queensland

The Queensland government’s opposition to domestic reservation stems, at least in part, from a perception that Queensland has been doing the “heavy lifting” in terms of domestic gas supply across eastern Australia.

Data on gas transportation shows this is not the case. While Queensland is an important seasonal supply source for the southern states during winter, it also imports material volumes of gas from the south during summer. On a net basis, it supplies virtually zero gas to the south over the longer term, with net supply in some years offset by net imports in others. This is despite Queensland having the largest reserves in eastern Australia (Figure 3). 

In contrast, Victoria supplies large volumes to gas users in Victoria, New South Wales, South Australia and Tasmania. Further, since 2017, Victoria has exported enough gas to other southern states to meet six years of its own consumption. 

Figure 3: Queensland and Victorian net gas exports to other states, PJ

^{Source: IEEFA, Australian Gas and LNG Tracker.} 

The Queensland government’s opposition to domestic gas reservation stands in stark contrast to its more recent focus on oil supply security. It also ignores the material impacts of the LNG export sector on domestic gas users, and the benefits that would flow to Queensland households and businesses if a reservation policy led to increased domestic gas supply and lower prices. 

While gas supply security has not received as much media focus as oil, it is remarkable that the Queensland government continues to ignore the benefits of gas reservation for Queenslanders.