S&P/ASX 200 Index (ASX: XJO) energy shares, along with their smaller competitors, produce more than enough gas to meet Australia's domestic needs.
But, as you're likely aware, companies including Woodside Energy Group Ltd (ASX: WDS), Santos Ltd (ASX: STO) and Beach Energy Ltd (ASX: BPT) export a significant quantity of their LNG overseas.
Much of the LNG exported by ASX 200 energy shares goes to northern Asian nations like Japan, China, and South Korea, which pay a premium for the gas.
With these exports locked into long-term contracts and only limited new gas fields being developed domestically, Australia has reached a dubious scenario in which the energy-rich country is poised to import gas for the first time.
Indeed, the Australian Energy Market Operator (AEMO) forecasts that with the dearth of new domestic supplies, often held back by opponents to new fossil fuel projects on environmental grounds, Australia's east coast states could be hit with critical gas shortages inside the next few years.
Commenting on that outlook, Rick Wilkinson, CEO of consultancy Energy Quest, said (courtesy of ABC News), "We're in this position because, quite simply, we've run out of time. Even though demand for gas has been falling … what's happening is that supply has been falling even faster."
It seems that the medium-term answer doesn't lie with ASX 200 energy shares like Woodside or Santos. Rather, it could be the new $1 billion LNG import terminal under construction in New South Wales.
The project is spearheaded by Squadron Energy, a company controlled by Fortescue Ltd (ASX: FMG) founder Andrew Forrest.
Move over ASX 200 energy shares
"I would go as far to say the outlook is dire," Rob Wheals, the CEO of Squadron Energy said on the east coast gas shortage.
Wheals added (quoted by ABC News):
The decline will be as much as 40% from current supply in southern markets and it's not being replaced. The only solution is right here, right now in Port Kembla… The market needs storage. This import terminal presents the only available solution to avoid that supply crisis.
With Woodside and other ASX 200 energy shares honouring their gas export commitments, Squadron Energy aims to begin LNG imports by winter 2026.
As for why the company is looking to import from overseas rather than potentially Western Australia, Wheals said, "By accessing those global markets, we can access the most affordable gas at the right time."
Wheals added, "When we have our peak demand in wintertime, it's lower demand in the Northern Hemisphere and we can access more affordable gas."
Does Australia need more domestic gas production?
One solution to the gas crunch would be streamlining the process for ASX 200 energy shares like Santos and Woodside to develop new projects in Australia.
That's a solution that Federal Resources Minister Madeleine King favours.
According to King:
The closer the source of energy is to where it is going to be used, whether it is in households or manufacturing, the cheaper it is.
The more you have to transport anything, the more it adds cost. So that's why I'm working with my state and territory counterparts to make sure there is gas available closer to the places in which it's used.
But not everyone is happy with that plan of action.
Commenting on Woodside's recent $3 billion bond pricing, at least some of which is likely to fund new gas projects, Brett Morgan, superannuation funds analyst at Market Forces told the Motley Fool:
A resounding majority of shareholders rejected Woodside's deplorable climate strategy this year and investors should not offer up another cent until it shelves its reckless gas growth plans.
With ASX 200 energy shares being encouraged to supply more gas from one side while being discouraged from the other side, you can see why Australia is now on track to mark its first LNG imports in history.
