Southern states face a winter gas shortage and will rely on excess supply from Queensland.
Considerable storage and transport capacity is needed to shift the gas south, according to an interim report by the Australian Competition and Consumer Commission.
"It is imperative that gas flows from Queensland to the southern states, and that there is enough storage for it," Commissioner Anna Brakey said.
High demand is expected in the third quarters of 2023 and 2024, however the report notes it depends on how much gas producers commit to the Australian market.
The commission described the overall outlook for both winters as "finely balanced".
Pressure on supply will likely ease next year, but that depends on several factors including unexpected disasters such as floods.
"Weather and electricity market conditions have a strong influence on the amount of gas-fired generation we need in the energy mix, so the demand outlook remains somewhat uncertain," Ms Brakey said.
The Australian Petroleum Production and Exploration Association said the report confirms the industry was fulfilling its commitment to domestic supply.
It also highlights insufficient gas is being produced in NSW and Victoria where uncertain regulatory regimes and bans were "stifling investment in new supply", it said.
The association's chief executive Samantha McCulloch said bans, moratoriums and interventions mean millions of NSW and Victorian users pay an extra $2 per gigajoule whenever their state must transport gas from Queensland.
"The best way to avoid shortfalls and put downward pressure on prices is to bring on new gas supply close to where it's used because the cheapest gas is the gas closest to the customer," she said.
"New supply such as the Santos Narrabri Gas Project, which could supply up to half the natural gas used in NSW homes and businesses, is needed as a matter of priority."
The commission said the industry is mostly complying with the emergency gas price cap that was introduced at the end of 2022 in response to rising prices.
