East coast gas market
An interconnected gas grid connects Australia’s eastern, northern and southern states and territories. This market has undergone structural change as the Queensland gas export industry has developed. These changes have resulted in changes to the direction of pipeline flows, the domestic supply/demand balance and gas contract prices.
The Australian Government is undertaking a range of reforms to improve the functioning of the market and implementing measures to deliver affordable and reliable gas.
Australia’s Gas-Fired Recovery Plan
The government’s Gas-Fired Recovery agenda supports energy reliability, security and affordability to stimulate Australia’s economic recovery, enable industry growth and support Australian jobs.
This plan focuses on 3 key action areas:
- unlocking gas supply
- ensuring efficient transportation
- empowering consumers.
The government committed $50.3 million in funding in the 2022-23 Budget under the Accelerating Priority Gas Infrastructure measure. This measure includes investment in:
- Seven infrastructure projects that support National Gas Infrastructure Priority (NGIP) priority actions, for early works support, and
- Feasibility studies and options for CO2-carrying pipelines from major gas and industrial hubs to prospective sites for carbon capture and storage.
This is in addition to the commitment of $58.6 million in funding in the 2021-22 Budget. The 2021-22 Budget measures were designed to enable our gas market to continue to accelerate Australia’s economic recovery and guarantee our competitive advantage in key industries. These measures included:
- The release of the National Gas Infrastructure Plan: Interim Report
- $38.7 million of early works support for critical gas infrastructure projects
- $3.5 million for the development of a long-term Future Gas Infrastructure Investment Framework
- $4.6 million to develop initiatives that empower gas reliant businesses to negotiate competitive outcomes, which includes developing a voluntary standardised contract framework with industry
- $6.2 million to design, consult and implement reforms to continue accelerating the development of Wallumbilla as Australia’s Gas Supply Hub
- $5.6 million to develop a further National Gas Infrastructure Plan for 2022.
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National Gas Infrastructure Plans and Infrastructure Investment Framework
On 26 November 2021, the government released the first National Gas Infrastructure Plan (2021 NGIP). The 2021 NGIP outlines a long-term development pathway for gas supply and infrastructure and identifies priority actions to ensure more gas can be delivered at least cost to support the needs of Australian households and businesses.
This builds on the government’s release of the National Gas Infrastructure Plan: Interim Report in May 2021, which identifies the critical supply and infrastructure developments required to alleviate risks of gas supply shortfalls in the near-term.
Alongside the NGIP, the government has developed the Future Gas Infrastructure Investment Framework (the Investment Framework). While the government’s preference is for industry to lead timely investment in critical gas infrastructure projects, there may be circumstances where this does not occur. The Investment Framework provides greater certainty on the circumstances where the government will consider providing support for gas infrastructure projects, and outlines principles for this support.
As a first step under the Investment Framework, the government opened a non‑binding Expression of Interest (EOI) process for projects aligned with the NGIP priority actions. The purpose of the EOI was to identify opportunities where government can help accelerate critical gas infrastructure projects towards Final Investment Decision.
The EOI invited submissions on priority mid-stream infrastructure projects to understand if support is required at this time to deliver on the 2021 NGIP priority actions. Projects proceeding without the need for support were also invited to provide an information-only submission to enable the government to have a broader market view when considering the EOIs. The EOI process closed on 10 January 2022.
On 22 March 2022, the government announced $50.3 million under the Accelerating Priority Gas Infrastructure measure. As part of the measure, 7 infrastructure projects have been identified for early works support following consideration of the expression of interest process.
Ensuring there is no domestic gas shortfall
The Australian Domestic Gas Security Mechanism (ADGSM) commenced on 1 July 2017 and is in place until 1 January 2023. It aims to ensure there is a sufficient supply of natural gas to meet the forecast needs of energy users within Australia.
This mechanism means that, if there is a supply shortfall in the domestic market, liquefied natural gas (LNG) projects may be required to limit their exports or find new gas sources.
The decision as to whether or not to restrict exports sits with the Commonwealth Minister for Resources and Water. The minister’s decisions are informed by expert advice from the Australian Energy Market Operator (AEMO), the Australian Competition and Consumer Commission (ACCC), and industry. New ADGSM Guidelines came into force on 6 January 2021.
Improving the transparency, competitiveness and long-term security of Australia’s gas supply
The government is working through the Energy National Cabinet Reform Committee (ENCRC) to consider new measures that will require greater transparency across the gas market, from gas producers and LNG exporters on prices, reserves and resources, to ensure that the gas market operates in an increasingly accountable and transparent way.
Ensuring our gas pipelines operate effectively is essential for the secure delivery of domestic gas supplies at affordable prices. This is why the government is also progressing a comprehensive review of pipeline regulation through ENCRC. This will identify and evaluate options to deliver an effective and well-integrated gas pipeline regulatory framework.
In addition, a number of reforms have commenced and these are expected to support greater transparency and market liquidity:
- New rules to level the negotiating playing field for gas transportation commenced on 1 August 2017. They require pipeline companies to provide more information to the market and establish binding arbitration to resolve contract negotiation disputes.
- Pipeline capacity trading and day ahead auction reforms commenced on 1 March 2019.
- On 3 May 2021, Energy Ministers agreed a package of new gas pipeline regulation reforms to improve price transparency and make it easier to do business.
Australian Competition and Consumer Commission Gas Inquiry
Ensuring our electricity and gas markets operate competitively, transparently and in the long-term interests of consumers is a core Australian Government priority. Improved scrutiny and accountability is placing downward pressure on prices and improving market operations.
The ACCC is conducting a wide-ranging inquiry into the supply of and demand for natural gas in Australia.
Matters being monitored and considered by the inquiry include:
- pricing and availability of offers to supply gas
- volumes of gas supplied or available for current or future supply, including natural gas extracted or produced in Australia, or imported into Australia
- pricing, volume and availability of gas for domestic supply compared to the pricing, volume and availability of gas for export
- pricing, volume and availability of other goods or services, such as goods or services for drilling, storing or processing gas, that enable, assist or facilitate the supply of gas or gas transportation services in Australia.
The ACCC has extended its inquiry to December 2025, to continue to publish regular information on the supply and pricing of gas. Extending the inquiry ensures continued transparency of the gas market and identify opportunities for market reform, including in the retail sector.
See the ACCC website for more information.
Gas Supply Guarantee
Gas powered generation of electricity has become increasingly important to electricity supply in the past decade and measures are in place to ensure we can meet our energy needs during peak demand periods, such as heatwaves. This has been achieved through co-operation and agreement between gas producers and power generation companies.
The gas pipeline industry also agreed to support the Peak Electricity Demand – Gas Supply Guarantee by committing to provide pipeline access to ensure the gas arrives at its destination on time and at a reasonable price.