The report found the $80 billion LNG export industry based around Gladstone, took about 70 per cent of the east coast's gas supply.

AEMO chief executive Audrey Zibelman said their analysis included information from east coast gas producers who have provided updated forecasts of their best estimates of likely annual production as well as big LNG exporters out of Gladstone in Central Queensland.

"Based on the most recent information from industry, together with AEMO's forecast demand, gas supply remains tight in eastern and south-eastern Australia in 2018 and 2019, there remains a risk of a supply shortfall," Ms Zibelman said.

"Projections of aggregated gas production and LNG gas demand vary, based on market conditions and contracting, indicating a dynamic situation that can change rapidly and warrants continued close attention and monitoring."

The AEMO report found the aggregated projection of annual gas production - provided by gas producers - is 1891 petajoules in 2018 and 1886 petajoules in 2019. The annual demand for LNG exports was expected to be 1303 petajoules in 2018 and 1336 petajoules in 2019.

AEMO said this left 588 petajoules of gas available for use next year and 550 petajoules in 2019, with the shortfalls arising after subtracting domestic gas requirements for households and businesses of 642 petajoules in 2018 and 598 petajoules in 2019.

It found the closure of Engie's Hazelwood plant in Mach lead to 10 terrawatt hours of electricity production which must be supplied by other generators in the NEM, including gas-powered generation. Renewables have not been able to fill the gap.

SA, which has been hit by reliability issues since large-scale black-outs last summer, has also turned back to gas-fired power which has also increased demand.


By contrast with the eastern states, all export and domestic gas demand in Western Australia will be met in 2018 and 2019, according to the market operator.

AEMO has recommended federal, state and territory governments develop a formal operating risk reserve standard to apply in the eastern and southern gas markets.

But the peak gas body said gas producers would ensure there is more gas for domestic supply.

"Looking ahead to 2018, there is a large supply of uncontracted gas available for domestic customers. The industry has made it clear that it will ensure that sufficient gas is available for the domestic market," Australian Petroleum Production and Exploration Association chief executive Maclolm Roberts said.

"Despite these moves expanding local supply, APPEA is very concerned that AEMO has now produced a much more pessimistic forecast than six months ago."

The Turnbull government, which has been warning of pulling the trigger on the domestic gas export mechanism for months, has also received a report from the Australian Competition and Consumer Commission as the gas sector.

The federal government has until November 1 to enact the gas mechanism which will come into effect on January 1

ACCC chairman Rod Sims last week warned the federal government may soon have to choose between market interference or saving manufacturing jobs, scolding east coast exporters for not supplying enough domestic gas.

The move to limit exports is certain to raise the ire of the three LNG exporters who say they have already responded to the tight east coast gas market and made more gas available.

Under the process for the policy, the declaration of a "shortfall" in the gas market for 2018 would lead to limits on exports being applied to relevant LNG producers for the year, while others would receive an "unlimited" export licence.