Drill, baby, drill: The case for Australia's next gas boom

Australia is aggressively retiring its coal plants while running down its gas supply. That's led small-cap veteran Ben Griffiths to make the bold call that the country is set to start drilling for gas in a way it hasn't since the North West Shelf was discovered half a century ago.

Griffiths, the co-founder of Eley Griffiths, put it forward as his pick for the "5 Shocking Predictions for 2027 and Beyond" session at Livewire Live on Tuesday.

The thesis has three trends converging at the same time, which he says leaves Australia with no choice but to "drill, baby, drill".

Coal out, demand up

Coal still does most of the heavy lifting in Australia. Electricity generation in 2025 broke down as follows, according to the Department of Climate Change, Energy, the Environment and Water:

• Coal: 42.7%
• Solar: 19.6%
• Gas: 16.2%
• Wind: 14.0%
• Hydro, oil and other: 7.5%

This mix is about to experience a dramatic shift, with Griffiths flagging a sharp drop in available coal capacity from about 2028 as plants in New South Wales, Queensland and Victoria retire, with the decline steepest in NSW.

Meanwhile, demand is in a persistent and steady uptrend. Australia consumes around 200 terawatt hours of electricity a year, and Griffiths expects that to rise about 50% to close to 300 terawatt hours by 2035. Business electrification accounts for part of the increase, but data centres are the biggest driver. They use around 3% of grid power today and are forecast to use 13% by 2035.

The case for gas

Griffiths sees gas as the only fuel that can fill the hole coal leaves behind. "Gas is the only viable and scalable baseload fuel for electricity generation needs," he said.

Australia relies on it far less than its peers, as approximately a third of electricity generation across G10 nations comes from gas, while the US sits at 43% and Australia at just 16%.

The catch is price. "Lower gas prices come from greater supply," Griffiths said, and he used North America to show what happens when supply arrives. Prices are per gigajoule, in local currencies:

• United States: More than $13 in mid-2008, $2.93 today, after shale discoveries across Texas, Louisiana and Pennsylvania
• Canada: About $7.50 in 2008, to $1.16 today, after the Montney formation in British Columbia added some 450 trillion cubic feet of gas
• Australia: About $3.50 in 2008, rising to $10.40 today

A supply gap from 2032

Local gas demand has actually been falling as governments such as Victoria's push households and businesses from gas to electricity. But contracted and uncontracted supply drops away faster, and Griffiths expects the lines to cross from about 2032. "We won't have enough gas to put down the gas pipes," he said. "We have a real problem coming."

Export plants face the same squeeze, with Griffiths flagging Gladstone LNG in Queensland, Darwin LNG and the North West Shelf as all running short of feedstock by the mid-2030s.

"These are important, strategic, valuable, long-term assets," he said. "They're going to be empty. We need gas, and we need it now."

Timing is the other classic problem. The Scott Reef and North Rankin discoveries in 1971 and 1972 laid the foundations for the North West Shelf, but the first LNG cargo didn't ship to Japan until 1989. That took 17 years. "We're talking about some of these cases we're seven years away from being empty," Griffiths said.

Where to look

Griffiths isn't worried about whether the gas is there. Australia has been drilling wells since the 1950s, the pipeline network already runs across the sedimentary basins, and the industry knows how to do it.

"We have the geology. We know that. We have the infrastructure. It's right before you. And we have the expertise," he said.

He named three areas where he expects market interest to grow. 

1. Taroom Trough in Queensland
2. Beetaloo Basin in the Northern Territory
3. Bedout Sub-basin off the Canning coast in Western Australia

Listed and unlisted, local and international players are drilling across all three with mixed results so far.

The Beetaloo is the one Griffiths finds most interesting, with what he called serious international money behind efforts to find gas and send it to Darwin, and further east and south.

He also pointed to two signs that sentiment is turning. In the latest reporting season, Woodside announced it would redirect its exploration spending from clean energy, back towards oil and gas. Separately, Victoria's shadow energy minister told the Financial Review that a Coalition government would support new gas exploration in the state.

Griffiths didn't name any stocks, but here are some ASX-listed names, by basin.

• Beetaloo Basin): Tamboran Resources (TBN), Beetaloo Energy Australia (BTL) and Central Petroleum (CTP)
• Taroom Trough: Omega Oil and Gas (OMA), Elixir Energy (EXR) and Beach Energy (BPT), as a partner with OMA
• Bedout Sub-basin: Santos (STO) via Dorado and Pavo discoveries, Carnarvon Energy (CVN) and Finder Energy (FDR)