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.
Measures to deliver affordable, reliable gas
On 6 August 2019 the government announced an additional package of measures to deliver affordable and reliable gas. These include:
- National Gas Reservation Scheme: Past approvals of large gas export projects have not adequately considered the impact on the domestic gas market. This has contributed to some of the recent price pressures. The Australian Government will consider options to establish a national gas reservation scheme by February 2021, which would only apply to future gas projects. This program of work is being undertaken by the Department of Industry, Science, Energy and Resources.
- Exploring electrification of industrial power: This program will examine if more gas can be freed up for domestic gas consumers, by engaging with the Queensland Liquefied Natural Gas (LNG) plants to explore the feasibility of electrifying some of their processes.
The government is also providing $8.4 million to accelerate the development of the Beetaloo Basin in the Northern Territory to free up domestic gas supplies and deliver economic returns for local communities. This includes:
- $1.5 million to fund a feasibility study to determine which gas projects could be accelerated
- $5 million to progress the Northern Territory’s strategic regional environmental assessments
- $1.9 million for an economic development strategy to ensure gas development would benefit the Aboriginal Peoples of the Barkly Region and the Northern Territory
Ensuring there is no domestic gas shortfall
The Australian Domestic Gas Security Mechanism commenced on 1 July 2017. It is a temporary measure that aims to ensure that the domestic market doesn’t experience gas shortfalls due to gas export commitments. This mechanism means that, if necessary, the government can restrict liquefied gas exports if they are deemed to leave the domestic market short of gas. The decision as to whether or not to restrict exports sits with the Commonwealth Minister for Resources and Northern Australia. The Minister will rely on assessments from the Australian Energy Market Operator (AEMO), the Australian Competition and Consumer Commission (ACCC), industry and other stakeholders in the decision-making process.
The government brought forward a review of the mechanism in September 2019 to ensure the mechanism is still delivering a functional domestic gas market with the lowest possible prices for consumers.
Improving the transparency, competitiveness and long-term security of Australia’s gas supply
The government is working through COAG Energy Council 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 the COAG Energy Council. This will identify and evaluate options to deliver an effective and well-integrated gas pipeline regulatory framework.
The ACCC gas inquiry has also been extended to 2025.
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.
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 Australian Competition and Consumer Commission (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:
- the pricing and availability of offers to supply gas
- the volumes of gas supplied or available for current or future supply, including natural gas extracted or produced in Australia, or imported into Australia
- the pricing, volume and availability of gas for domestic supply compared to the pricing, volume and availability of gas for export
- the 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 will extend its inquiry, and continue to publish regular information on the supply and pricing of gas. Extending the inquiry to December 2025 will ensure 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.