Australian gas industry is the biggest user of Australian gas, says new report

Australia’s gas industry uses more of its own gas than any other sector of the economy, in a self-reinforcing demand cycle, according to a new report.

Climate finance group Market Forces sought to examine industry claims that gas was critical to Australian manufacturing using data from the Department of Climate Change, Energy, the Environment and Waters (DCCEEW).

The report, Australia’s Gas Guzzlers, found the gas industry alone burns more gas just to operate LNG export terminals than the entire Australian manufacturing sector.

When counting gas demand exports, processing and power generation together, it found the gas industry used 13 times more gas than all other domestic manufacturing.

Outside the gas industry itself, the biggest use for Australian gas was in the production of aluminium and ammonia. Ammonia is commonly used to make fertilisers, explosives, cleaning agents and chemical precursors.

As part of the analysis, the authors compiled a list of the 30 biggest industrial users of Australian gas in the 2024-2025 financial year based on publicly available data and disclosures.

Broken down across the states and territories, six of the biggest ten gas users were in Western Australia, which represent more than four-fifths of the state’s manufacturing gas use. Across Australia, five ASX-listed entities – Rio Tinto, South32, Orica, Dyno Nobel and Wesfarmers – operated six of the ten biggest gas-using facilities.

“We think continuing to rely on gas as feedstock and a fuel for those facilities is going to be a long-term financial risk to their viability,” the report said.

These dynamics suggest a new, more immediate dimension to the phenomenon of “gas eating gas” – a phrase coined by IEEFA analyst Kevin Morrison to describe what was happening in Australia as gas exports drove up domestic gas prices, which in turn crushed demand by pushing users away from the fuel and toward alternatives like renewables.

Kyle Robertson, head of research at Market Forces, said that four-fifths of Australian gas is consumed by the gas industry itself in an “ouroboros” that is then used to justify continued gas development.

“A key part of the gas industry’s social licence in Australia comes from this notion that it is essential for domestic use in Australia,” Robertson said.

“We have seen advertising campaigns from the likes of  [Australian Energy Producers] ramping up through the federal election campaign suggesting gas is essential for Australian manufacturing.”

“This is being portrayed by the gas industry as in the national interest when it is just in the interest of the gas industry.”

Australian Energy Producers (AEP), the country’s oldest oil and gas industry association, has argued that Australian gas production is critical for Australian manufacturing.

In an opinion piece published in The West Australian, AEP CEO Samantha McCulloch suggested “Australia’s energy security and economic growth is contingent on ongoing gas supply.”

Robertson said the realities of domestic gas consumption meant not only that Australia was far less dependent on the gas industry than has been suggested, but that a small group of large industrial operations faced greater financial risk for having tied their operations to gas.

As growing numbers of people move away from gas in the home, and industrial users find alternatives in renewable energy, a shrinking user base among gas networks will force those last to leave to pay higher charges to prop up fading infrastructure.

“We think continuing to rely on gas as feedstock and a fuel for those facilities is going to be a long-term financial risk to their viability,” he said.

To get off gas, the report found the five largest ASX-listed gas users must invest in clean and renewable energy three-to-five times more than their current levels by 2030, as recommended by the OECD.

It estimated that gas use by these five companies amounted to 54 million tonnes of carbon emissions over the next decade, roughly equivalent to running Australia’s biggest coal-fired power plant for nearly four years.

Of these, Rio Tinto and South 32 spent just 3% of capital expenditure on decarbonisation, Orica had spent 5% and Dyno Nobel had spent 6%. Wesfarmers does not disclose how much it spends on decarbonisation, the report said.

Gas is a form of methane, a potent greenhouse gas. Over a 20-year period methane is 80 times more potent as a greenhouse gas than carbon dioxide.

Australia’s gas industry organised an earlier energy transition in the 60s and 70s, when it organised the move from town gas, produced from coal, to so-called “natural gas” drawn from pockets beneath the ground.