Ensuring natural gas supply to the domestic market; what has worked and what will work

Ensuring natural gas supply to the domestic market; what has worked and what will work

Australian Domestic Gas Outlook Conference Sydney, Tuesday 1 April 2025

Slides to this speech can be found here.

Chart 1

On behalf of ExxonMobil, thank you for the opportunity to speak with you today.

ExxonMobil Australia is one of our country’s oldest energy companies.

We’ve been part of the community for 130 years. During that time, we have invested $41 billion in Australia.

And for over 50 years ExxonMobil has supplied 100% of our east coast gas production exclusively to the domestic market.

2024 was a transformational year for the Gippsland Basin and Kipper Unit Joint Ventures.

As we produced our last barrel of Gippsland crude oil and retired one of three gas plants at Longford, we kept our focus firmly on the future, commissioning a modern, reliable ethane power generation facility at Long Island Point, delivering additional offshore gas production capacity and completing onshore and offshore modifications to ensure the system will reliably produce gas into the next decade.

The projects brought online in 2024 represent an investment in domestic gas supply and reliability of over five hundred million dollars.

2025 promises more significant milestones including the drilling and startup of the Kipper 1B project and the commencement of a 5 well drilling program as part of the Turrum Phase 3 project.

We recognise both our existing and our planned gas developments are an important part of the energy supply Australians depend on and so today, as we have done in past years, I will share our Gippsland Basin production outlook.

As the title of this presentation acknowledges, it's also important we talk about what it is going to take to ensure future gas supply and sustainably lower prices for the domestic market.

The Federal Government is right when it says Australian gas will play an important role in global and domestic energy to 2050 and beyond.

The Australian Energy Market Operator is right when it says this means investment in new gas production and infrastructure is required.

And the ACCC is right when it says new gas production and infrastructure is not being brought online fast enough.

But despite a consensus on the problem and its causes, there is less alignment on how to reclaim the investment certainty that is required to secure the capital to produce the energy Australia needs.

This matters because investment is the key to ensuring reliable and affordable gas for Australian households and businesses.

Chart 2

In 2024 ExxonMobil successfully completed the most significant change to the way the Gippsland Basin Joint Venture operates since production commenced in 1969, bringing to an end crude oil production and retiring one of three gas plants at Longford.

This milestone marks over five decades of industry leading operations to produce more than 5 billion barrels of liquids and 11 trillion cubic feet of natural gas.

The changes to our operations in 2024 completed the transformation of the Gippsland Basin Joint Venture from an oil and gas business to a gas business and will ensure the production system delivers the reliability our customers expect.

Over the course of 200 000 construction hours, our team installed 4 kilometres of piping, 1500 valves and 22 kilometres of instrument cable, and all while maintaining our reliable supply of gas.

Fourth quarter 2024 production was equal to the average of the previous 5 years and 6% higher than the fourth quarter of 2023.

This transformation has right sized the Gippsland Basin Joint Venture’s onshore and offshore facilities, setting us up to safely and reliably produce the remaining gas reserves into the next decade.

However, as we have said for several years now, as offshore capacity declines, the production system will and must operate differently. This means its role in the system and market is changing.

For our customers on the east coast, ExxonMobil will remain a reliable supplier of gas.

However, the decrease in available Gippsland Basin Joint Venture production capacity means we will not be able to respond to disruptions that go beyond the needs of our customers to maintain the reliability, resilience, and stability of the system.

As you will see today, the Gippsland Basin Joint Venture is an important part of the solution, but we won’t be able to do it all on our own.

Chart 3

After more than 50 years of production, the Gippsland Basin and Kipper Unit Joint Ventures supplied 51%^[1] of the gas consumed in southern states during 2024.

We expect to remain the largest supplier of natural gas to the domestic market until at least the end of this decade and will continue to supply gas from the Gippsland Basin into the next decade.

This has only been possible because ExxonMobil and our joint venture partners have invested $8 billion over the past 20 years to develop new domestic gas supply.

In 2024, we safely completed more than one million work hours to install compression facilities on the West Tuna platform. The Kipper Compression Project is a crucial project for domestic natural gas supply that will extend the productive life of the Gippsland Basin. As you can see in the upper right of the chart, gas supply projects brought online since 2021, including the Kipper Compression Project, will supply more than three times the gas to the domestic market this decade than Narrabri and Beetaloo combined.

An ongoing commitment to investment and efficient project execution have been the key to supplying customers with the gas they need for more than 50 years.

This is illustrated on the left side of the chart where you can see 27%[2] of the production anticipated from the Gippsland Basin and Kipper Unit Joint Ventures this year was not online in 2020, that’s just five years ago, and looking ahead, 75%[3] of the gas we expect to produce in 2028 was not online in 2020.

This highlights the importance of the decisions earlier this year to approve investment of over five hundred million dollars in the Turrum Phase 3 and Kipper 1B projects.

The Turrum Phase 3 project includes a 5 well drilling program and is the culmination of more than 20 years of commitment to develop the Turrum field. As you can see from the chart in the upper right, Turrum Phase 3 will produce more gas this decade than either Narrabri or Beetaloo.

Forecast production in 2025 and 2026 is lower compared to last year’s outlook, primarily due to planned maintenance and Turrum Phase 3 project work.

Forecast production from 2027 to 2029 is higher compared to last year’s outlook, primarily due to the now committed Kipper 1B and Turrum Phase 3 projects.

Combined with lower gas consumption in 2023 and 2024 than forecast, these two projects support deferral of Longford Gas Plant 3 retirement from December 2027 to December 2028 which will extend and maximise the daily capacity available from Longford.

In the lower right of this chart, you can see by 2028, the developments currently in execution exceed by a factor of two the incremental daily gas capacity that can be delivered to the southern states by the stage 3 South West Queensland Pipeline expansion.

Chart 4

Over the past five years, at this conference, regardless of whether gas prices have been high or low, rising or falling, I have talked about how attracting the capital to invest in new gas supply depends on efficient regulation and stable policy.

Australia is one of the world’s great countries, built on natural resources and a skilled workforce.

And for decades, Australia held a reputation as a low-risk and reliable place to invest. That reputation attracted direct foreign investment, developing Australia faster than domestic savings alone would allow, and increasing the living standards of all Australians.

In the 1960s, BHP, at the time Australia’s largest and most sophisticated mining company, held exploration licenses in Bass Strait but lacked the expertise to explore for, develop and produce oil and gas.  Esso, with global operations in oil and gas exploration, development and production, joined BHP to form, and operate, the Gippsland Basin Joint Venture.

Since 1964, the Gippsland Basin Joint Venture has been one of Australia’s most successful and enduring but least known enterprises.

The Gippsland Basin Joint Venture has produced more than half of the crude oil ever produced in Australia and 17% of all the natural gas consumed in Australia. It positioned Australia to weather the 1970s oil shocks and, through the mid-1980s, 10 cents in every dollar of tax collected by the Federal Government was paid by the Gippsland Basin Joint Venture participants. Almost everyone in this room today has been educated in a school or spent time in a hospital built with the tax paid by the Gippsland Basin Joint Venture.

The Gippsland Basin is where almost everything that is now common in Australia’s oil and gas industry happened for the first time; the first offshore well, the first offshore gas discovery, the first offshore oil discovery, the first offshore oil and gas development, the first offshore platform, the first 3D seismic survey, the first subsea completion and the deepest water exploration well drilled in Australia.

The hydrocarbons from the Gippsland Basin Joint Venture enabled development of entire downstream industries, paper, steel, glass, fuels refining, food processing and chemicals. In turn these industries supported the growth of university departments to train the engineers and scientists that went on to run these businesses. These universities and graduates will go on to build the industries of the future.

The large-scale deployment of natural gas into two million Victorian homes provided energy for space heating, hot water and cooking, transitioning households away from high emissions town gas, coal and heating oil. These benefits continue today as gas enables the transformation of our energy system.

The Gippsland Basin Joint Venture has been good for Australia and Australians.

Australia needs to restore the conditions that enabled decades of investment in the Gippsland Basin or we risk serious implications for future investments, not just in oil and gas, but across the economy, in renewable energy, mining, manufacturing and transport to name a few.

Two aspects are particularly relevant to domestic gas supply projects; barriers to development, which impact project cost and schedule and energy market policy stability, which impacts project revenue.

There are many barriers to project development in Australia, such as duplicative State and Federal regulations, which result in complex, uncertain and lengthy project approval processes.

And while it is not always straightforward for the public to make the link between the efficiency of regulatory processes and their standard of living, faster project assessment processes, elimination of duplication and certainty over timeframes matter to the daily lives of all Australians. Because without investment, domestic gas supply available to southern states will decrease by 51%^[4] by 2030, more than three times the forecast reduction in southern state gas consumption of 14%^[5].

There is nothing new about forecasts of gas supply shortfalls.

In 2018 the Australian Energy Market Operator predicted a gas supply shortfall for 2022.

At that time the market functioned exactly as it should and the Gippsland Basin Joint Venture sanctioned West Barracouta, which at the time was the largest domestic gas project this decade.

Eight hundred and forty days later, in April 2021 West Barracouta commenced production and instead of a market shortfall in 2022 the Gippsland Basin Joint Venture increased gas production by 11% over the year before, kept the lights on and produced more gas in 2022 than in any year since 2017.

West Barracouta ensured Australian customers had the gas they needed, when and where they needed it.

Regulatory efficiency and effectiveness are not trade-offs; Australia can, and once did, have both.

Which brings me to policy stability.

The most immediate and obvious effect of the federal government’s 2022 and 2023 intervention in gas markets was the cancellation of investment in domestic gas supply and the breakdown of the market between buyers and sellers.

The changes to government policy through 2023, particularly the Gas Market Code exemption framework, restored the minimum policy stability required to invest in new gas supply projects such as Turrum Phase 3 and Kipper 1B.

And while contracting activity in the wholesale gas market was higher in 2024 than 2023, contract tenure remains lower than before government intervention.

This should not be a surprise.

Again, returning to 2018.

In its September 2017 Gas Inquiry Interim Report the ACCC concluded “many users are delaying signing contracts for supply for 2018 and beyond … in the hope that government intervention … in the market will drive gas prices down.”

Since the ACCC made this common sense observation, federal governments have implemented at least seven significant domestic gas market policy changes or interventions including; the Heads of Agreement between the Federal Government and Queensland LNG exporters, the Voluntary Code of Conduct, changes to the Australian Domestic Gas Security Mechanism, the Gas Market Emergency Price Order, Gas Market Transparency Reforms, Stage 1 East Coast Gas Market Reforms, and the Mandatory Gas Market Code of Conduct.

At the same time, state governments have implemented additional interventions that undermine, or directly conflict with, federal objectives. In more than half of the gas inquiry reports published since 2017, the ACCC has highlighted the role of state governments preventing or limiting the development of gas supply.

In its latest Gas Inquiry Interim Report, the ACCC used the words ‘uncertain’ or ‘uncertainty’ 65 times, and almost every time the ACCC used those words it was to describe government policy or regulation.

In its first Interim Report in 2017 the ACCC used the words ‘uncertain’ or ‘uncertainty’ 13 times, and not once were they used to describe government policy or regulation.

In the 8 years since the ACCC’s first Interim Report, regulatory restrictions that prevent or impede development of new gas supply have become worse and risks that are normal in oil and gas markets such as geologic and engineering risk have been replaced by government policy and regulatory risk.

Chart 5

2024 was a year of relative policy stability compared to the two years before and just last week the ACCC released data that showed in the second half of 2024 wholesale term contracting activity reached its highest level since the government intervened in gas markets in 2022. The result was volumes contracted by producers for 2025 and 2026 supply more than doubled in the second half of 2024 compared to the preceding six months.

In other words, the uncertainty caused by the Federal Government’s 2022 intervention had begun to recede, the market was beginning to function well, and buyers were able to secure the gas they need.

Similarly, we have seen the early signs of a tentative return of investor confidence. The 2025 Gas Statement of Opportunities released less than two weeks ago reported an increase in forecast southern state gas production compared to the 2024 Gas Statement of Opportunities in the critical years between 2027 and 2032.

90% of net additional southern state production over this period is attributable to a single project, the Gippsland Basin Joint Venture’s Turrum Phase 3 project shown on the chart in blue.

It is a fact that the investment in Turrum Phase 3 relies on the policy stability provided by the Gas Market Code exemption framework and delivery remains dependent on efficient and predictable regulatory approvals.

In the last month however we have seen multiple proposals to intervene further in the market whether that is to expand the non-emergency powers of the Australian Energy Market Operator or an east coast domestic gas reservation.

And there will be some who no doubt will use the upcoming review of the Gas Market Code of Conduct to call for government to double down with more intervention and regulation. That approach risks repeating the mistakes of the past.

We urgently need to get back on a path that leaves behind the uncertainty resulting from repeated government interventions, to constructively and confidently build on the progress of the past year.

While the current policy and regulatory framework is clearly far from ideal, further changes to market related policy risks setting back the modest progress of the past year.

That is why the mandated review of the Gas Market Code in 2025 is the opportunity for government and regulators to ensure these and future gas investments continue to move forward by making a clear and durable commitment to long-term market policy stability.

Stability that will provide the certainty producers need to invest and the confidence buyers require to contract long term supply.

Chart 6

ExxonMobil has operated in Australia for over 130 years and our message to this conference has not changed in over a decade.

Recent economic conditions, with Australia recording its slowest growth in 32 years in 2024, have been difficult for many.

Over the longer term it is also true that the living standards of Australians have improved faster than living standards in most comparable economies.

This has largely been the result of macroeconomic and microeconomic reforms by successive state and federal governments over the past 40 years.

However, in recent years, reform efforts have stalled. Australia’s competitiveness is declining because of high energy and labor costs, low productivity and increasingly complex and lengthy regulatory processes.

There are many factors beyond Australia we cannot control or influence as we would like. However, by getting the policy settings at home right and putting our natural advantages to work, Australia puts itself in the best possible position to navigate global events, just as the Gippsland Basin Joint Venture helped Australia through the oil shocks of the 1970s.

Since the first ADGO conference, 60%[6] of the gas consumed in the southern states has been produced by the Gippsland Basin Joint Venture, close to consumers.

Increasingly however, Australia’s gas resources and production capacity are not located in the places people will consume them.

90% of proved and probable gas reserves on the east coast of Australia are located onshore in Queensland and the Northern Territory while two thirds to three quarters of domestic gas demand is in southern states. Matching production and consumption will require further investment in new southern state gas supply, transmission and storage.

If the experience of the past several years has demonstrated anything it must be that the interests of producers and consumers are far more similar than they are different.

That government intervention and price controls benefit neither producers nor consumers.

That reliable gas supply and sustainably lower prices cannot be achieved by driving away investment and applying ever more restrictive regulation on declining productive capacity.

For producers, investment in new gas supply means a sustainable business.

For consumers, investment in new gas supply means reliable supply and sustainably lower prices.

For Australia, investment in new gas supply means a viable transition, energy security and economic growth.

Fortunately, none of this requires a complex policy response, it does require commitment to and focus on two things, both of which Australia has successfully done in the past.

The first is regulatory reform.

Producers and consumers have an opportunity to come together to support simpler and faster regulatory approvals to responsibly develop all forms of energy supply, transmission and storage, including gas.

The second, is a clear and durable commitment to stable and supportive policy.

Again, producers and consumers have an opportunity to come together to call for government and regulators to use this year’s review of the Gas Market Code to commit to the long-term policy stability that is needed.

Stability that will provide the certainty producers need to invest and the confidence buyers require to contract long term supply.

We know what is required to ensure reliable domestic gas supply and sustainably lower prices because we have done it before.

Thankyou.

[1] Gas Bulletin Board, AEMO

[2] 2025 GBJV WP&B; KCP volumes 2024 GBJV WP&B

[3] 2025 GBJV WP&B; KCP volumes 2024 GBJV WP&B

[4] 2025 GSOO, Figure 29

[5] 2025 GSOO, Forecasting Portal

[6] AEMO Gas Bulletin Board