Rising exports of Victorian gas to NSW have prompted the owners of the two lines - APA and Jemena - to boost capacity to offset declining shipments from the Cooper Basin.
More gas is being redirected from the Cooper Basin into the Queensland export market which is forcing gas retailers to turn to the Bass Strait for supplies.
On Thursday, APA said it had agreed to a six-year deal with Origin Energy to pipe greater volumes of gas from Victoria to NSW.
As part of this, it will spend $65 million upgrading the Victorian interconnect near Albury.
This link can ship about 92 terrajoules a day into NSW in summer and about two thirds of that in winter. Capacity will be lifted by up to 59 per cent in winter, with slightly more gas possible in summer when demand in Victoria is lower.
Recently Origin agreed to source as much as 432 petajoules of gas from Esso Australia and BHP Billiton from Longford in a nine-year contract.
The contract price is linked to the oil price which, with a smaller contract signed recently by Infratil arm Lumo Energy, is the first time oil-linked gas contracts have been signed on the east coast, which will drive retail prices sharply higher.
Even once this expansion is completed, it will be only about a quarter of the size of the Singapore government-owned Eastern Gas Pipeline which runs from Victoria's east into southern NSW.
This link has the capacity to transport 106 petajoules of gas annually, with studies under way to raise that to 130 petajoules of gas. When it opened in late 2001, it shipped about 50 terrajoules a day.
Jemena said it is seeking to contract the extra capacity before making the final expansion commitment, while also completing engineering studies, with a commitment to proceed expected by the end of the year.
Jemena supplies large industrial users such as BlueScope Steel at Port Kembla, Marubeni Corp's Smithfield power station in Sydney and Energy Australia's power station at Tallawarra in Wollongong.