The Federal Government has announced new measures to help secure the Australian gas industry and gas supplies, put downward pressure on prices and encourage new investment in gas supplies.
The government has outlined that it will bring forward the scheduled review of the Australian Domestic Gas Security Mechanism (ADGSM) to 2019. A review was scheduled for 2020 but given major changes in global gas markets over the past six months, the government has decided to bring this review forward.
The review will assess if the ADGSM is still fit for purpose to deliver a functional domestic gas market with the lowest possible prices for consumers while ensuring strong investment in new gas production. It will specifically investigate the ongoing appropriateness of the ADGSM’s Total Market Security Obligation arrangements.
Since the ADGSM was established, the ACCC has developed a “netback” gas price series and it is timely to clarify how this and other gas price information contributes to the government’s decisions on wider gas policy. The review will be carried out by the Department of Industry, Innovation and Science and be completed by the end of September 2019.
The government has also announced it will consider options to establish a prospective national gas reservation scheme.
The government claims that past approvals of large gas export projects have not adequately considered the impact on the domestic gas market and that has contributed to some of the pressures seen in recent years.
In considering the establishment of a gas reservation scheme, the government said it will work cooperatively with the states and territories.The government will seek to conclude its consideration of options by February 2021. Should agreement not be reached with the states, the government has said it will look to develop its own policies to ensure future gas export proposals provide sufficient gas into the domestic market.
The government has also indicated it will increase transparency and supply in the gas market. This includes continuing reforms through the COAG Energy Council requiring improved transparency from gas producers and LNG exporters on prices, reserves and resources, and a comprehensive review of pipeline regulation. Consultation on these reforms will occur over August and September 2019.
The government announced it will also work to improve supply through further action by:
- Extending the ACCC’s role in monitoring and publishing data on the gas market in Australia until December 2025
- Engaging with LNG plants to explore whether some of their processes could be electrified to free up more gas for domestic use
- Engaging with the manufacturing sector to explore opportunities to lower gas costs and reduce demand through increased energy efficiency and electrification measures
- Considering the feasibility of establishing mechanisms to facilitate collective bargaining and improve the negotiating position of large industrial users for gas supply
- Seeking COAG Energy Council agreement to task the Australian Energy Market Commission with advising on further steps that could be taken to accelerate the establishment of a more liquid wholesale gas market
Minister for Resources and Northern Australia, Matt Canavan, said the measures would help create a stable domestic environment for the gas sector to grow, creating more jobs and wealth for Australians.
“Gas extraction has been one of the largest contributors to value-added growth in the mining industry in recent years because of growing export volumes. We want to see that success continue but it must return greater dividends to Australians,” Mr Canavan said.
“We are the world’s largest LNG exporter, with our gas exports growing 22 per cent to reach 70 million tonnes between 2017 and 2018 and potentially hitting 81 million tonnes in 2020-21.
“While we are proud that Australian gas powers industry around the world, we must also be able to reliably and affordably harness gas to grow our own industries and create more Australian jobs.
“Price and supply are inextricably linked. To put downward pressure on prices and shore up supply, we need more exploration and production. The plan outlined today tackles that and a host of other issues from all directions.”