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The introduction of the Australian Domestic Gas Security Mechanism (ADGSM) has contributed to more secure gas supplies and lower gas prices for Australian consumers, a comprehensive review has shown.

The ADGSM was introduced in 2017 to help guarantee domestic gas supplies with forecast shortages caused by growing exports and reduced production from gas fields offshore from Victoria.

The Minister for Resources and Northern Australia, Matt Canavan, said, “The review confirms the measures taken by the government in 2017 have been instrumental in stabilising the domestic gas market and keeping a lid on gas prices.”

The review’s findings on the ADGSM’s effectiveness are supported by the Australian Competition and Consumer Commission (ACCC) and Australia’s energy market bodies, including the Australian Energy Market Operator (AEMO) and the Australian Energy Regulator (AER).

Gas offers are around half the peak prices of over $20 per GJ from early 2017, before the ADGSM was introduced.

Short-term gas prices at the Wallumbilla Gas Supply Hub have fallen around 46 per cent between February 2017 and December 2019. December 2019 prices at Wallumbilla averaged $6.71 per GJ compared to the February 2017 average price of $12.49 per GJ. This is also a 32 per cent fall from the December 2018 average price.

“I recognise that some businesses are still finding it difficult to get longer term gas offers and that some price offers remain higher than I want to see, especially when international LNG prices are low,” Mr Canavan said.

“That is why we will keep the ADGSM in place until its scheduled end in 2023, and the ACCC will continue to monitor the gas sector out until 2025.”

Mr Canavan said he will work with states and territories over the next 12 months to consider options to establish a prospective national gas reservation policy.

“We can’t repeat the mistakes of the past in just letting our gas be shipped overseas with no thought to our domestic requirements,” Mr Canavan said.

“In doing this I will be mindful of the major contribution the LNG sector has made to energy security at home and abroad, and the business opportunities and jobs provided in many rural and regional communities.

“Maintaining Australia’s place as an attractive investment destination and reliable LNG supplier is a key priority for the Liberal/Nationals Government.”

The review also recommends the government strengthen the ADGSM’s mechanism for securing domestic gas. The Total Market Security Obligation (TMSO) and that the ADGSM’s guidelines include the ACCC’s LNG netback price series as a signal of how well a market is functioning in estimating any potential supply shortfall. These measures will help ensure that the ADGSM achieves its objective of securing gas supply for domestic users.

The government will further consult stakeholders on the proposed changes to the TMSO.

View the full report here.

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