The federal government is expected any day to announce the biggest shake-up of the east coast gas market in years. Ordinarily, gas producers would be alarmed at the prospect of such an overhaul, and for good reason. The past decade of gas market policy has been marked by rushed reforms, heavy-handed market interventions and more regulation.
This time, there is a degree of optimism that change can be for the better. The government’s Gas Market Review was set up earlier this year with an aim to “improve and streamline” the complex regulatory framework that currently governs the east coast gas market, and “ensure sufficient affordable gas supply in the longer term”.
Gas producers say taking reserves for Australia from existing export supplies would harm confidence to invest.Credit: Bloomberg
Reform is necessary and long overdue. A well-supplied and affordable gas market is essential for Australia’s economic and energy security. Natural gas provides reliable electricity, fuel for heating and cooking in more than 5 million Australian homes, and is the main source of energy for Australian manufacturing. Australian gas producers and users agree that the current gas market arrangements are not working for anyone.
As the Australian Competition and Consumer Commission recently found, the regulations that are meant to ensure a well-supplied and functioning market have not only failed to add any material volumes of new gas, or lower prices, they “appear to have had the unintended consequence of exacerbating the risk of domestic supply shortfalls”.
The government’s response is likely to introduce a gas reservation policy for the east coast. From the prime minister down, it has reassured our trade partners, including Japan and Korea, that the long-term gas export contracts so critical to their energy security will not be affected.
This assurance is important because Australia’s gas exports continue to underpin investment in new gas supply for both the domestic and export market, and investment appetite remains subdued from past interventions. Our trade partners are closely watching the government’s next move.
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Australian Energy Producers supports a prospective reservation policy that is linked to new supply. A well-designed reservation policy can provide long-term certainty for gas producers and users – particularly large manufacturers – to invest with confidence in major projects and infrastructure.
Our analysis found there is up to 140 petajoules per year of additional east coast gas supply that could be brought to market by 2030 – more than three times the volumes needed to avert the annual shortfalls that the Australian Energy Market Operator forecasts for southern states from 2029. That includes the Santos Narrabri project, which could meet half of NSW’s gas needs, but has been tied up in regulatory delays and court challenges for more than a decade.
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