Oil and Gas Explained

Petroleum, a general term used for oil and natural gas, plays an important role in our community. Find out more about oil and gas, including where they come from, how they are formed and how they get from the sub-surface to your home.

Natural Gas

  • Natural gas is a type of fossil fuel. It’s often called ‘natural gas’ because it’s a naturally occurring hydrocarbon. It’s colourless, odorless and consists mainly of methane, but can also contain varying amounts of other gases such as propane and butane.
  • Natural gas is found in several different types of rocks, including sandstones, coal seams and shales.
  • Natural gas is formed by the breakdown of organic matter under heat and pressure over hundreds of thousands of years as it becomes trapped in rock formations.
  • Natural gas has the lowest carbon intensity of all fossil fuels and is therefore considered a key component of Australia’s goal of reducing the carbon intensity of its economy.
  • Energy generated by natural gas is highly complementary to intermittent energy sources like wind and solar due to the fact that natural gas plants are especially fast-reacting and able to kick in quickly when intermittent sources are unable to cover demand.
  • Natural gas is used to create fertilisers and supply power plants that generate electricity for commercial and domestic users. The fuel is also used in manufacturing glass, steel, plastics, paint, fabrics and can power trains, cars, buses and trucks.
  • Liquefied Petroleum Gas (LPG) is a mix of propane and butane gases and has a variety of uses. It’s most commonly seen heating Australian barbeques and fueling many vehicles.
  • All around the world, we use natural gas every day to power our lives. From turning on the lights to cooking dinner on a gas stove, natural gas is an important resource in maintaining our quality of life.


  • Oil is refined to produce transport fuels, such as petrol (gasoline), diesel and jet fuel, as well as oils used for heating such as kerosene.
  • By-products from oil refining are also valuable. They are used in the production of plastics and chemicals, as well as many lubricants, waxes, tars and asphalts.
  • Nearly all pesticides and many fertilisers are made from gas, oil or oil by-products.
  • Australia has produced oil commercially since the 1960s, but domestic production has fallen in recent years, and currently Australia is only able to cover approximately 42% of its demand.

Liquefied Natural Gas

  • Liquefied natural gas – more commonly referred to as LNG – is natural gas (primarily methane and ethane) which has been chilled to -161oC so that it becomes a liquid.
  • Once it has been liquefied, the methane takes up much less space. In fact, LNG occupies about 1/600 the space of methane. In its liquefied form it can be exported in purpose-built tanker ships.
  • Australia has been exporting liquefied natural gas (LNG) since 1989, initially from developing gas reserves offshore western and northern Australia.
  • Australia is one of the world’s leading suppliers of LNG and has multiple operating LNG projects which are creating employment opportunities and delivering export income and tax revenue for the country.

Types of Gas Wells [infographic]

Types of Gas Wells

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