Government could secure lower energy bills for households as review examines ‘tapped-out’ gas supply

One of Australia’s leading energy experts has said a new Government review into the rules governing the gas sector offers an opportune moment not only to secure domestic East Coast supplies but to ensure fair prices for consumers.

Tony Grattan, director of the Energy Program at the Grattan Institute, told The Nightly the review announced on Monday by Energy Minister Chris Bowen should address the contentious debate over the link between domestic gas prices and international rates and the question of “what is a fair price?”

Mr Bowen on Monday said the six-month review would look at simplifying complex arrangements regulating the gas sector to ease supply pressures.

He indicated that new gas projects in the future would have to meet obligations to provide gas to the local market, rather than exporting all of their supplies abroad.

His comments triggered speculation about whether the Government may consider an East Coast gas reservation scheme, a suggestion he did not dismiss outright when asked at a press conference in Brisbane on Tuesday.

“It’s time to review all three mechanisms to see what works best, what doesn’t work. But our objective is to have Australian gas for Australian users at reasonable prices. And we haven’t been seeing enough of that,” he said.

Mr Bowen was referring to the mechanisms of the Australian Domestic Gas Security Mechanism (ADGSM), implemented by the Turnbull Government, the Heads of Agreement and the Gas Code of Conduct, which the Government is aiming to streamline to find to most efficient way of ensuring supplies.

The Government’s plan was announced as the Australian Competition and Consumer Commission (ACCC) warned that Australia’s east coast gas supply outlook had further deteriorated.

The ACCC’s latest gas inquiry report found a risk of a shortfall in the fourth quarter of 2025 and throughout 2026 “if Queensland LNG producers export all uncontracted gas”, as southern states will need to continually rely on gas from Queensland as their local reserves deplete.

The report said it was also “critical” to address underlying barriers to more efficient investment in domestic supply.

“There are sufficient gas reserves and resources to meet projected domestic demand for at least the next decade, but these are yet to be developed due to a combination of policy, technical and commercial factors,” it said.

ACCC Commissioner Anna Brakey said that while prices had eased over the past six months, in part reflecting movements in international prices, they continued to be higher than pre-2022 levels.

Grattan’s Tony Wood pointed out that the full report underscored the principle that “domestic gas customers will not pay more for the LNG exporters’ gas than international customers”, or export parity netback.

“They’re not saying that they’re going to impose a lower price on the domestic market artificially or otherwise. They’re going to basically make sure that we pay no more than that. I think that’s the right principle,” he said.

“I think it’s doable through the existing mechanisms, and with a bit of will from the companies, they should remember that it’s in their interest to come up with a deal that they can live with, because otherwise the government will do something they won’t like.”

Asked on Tuesday if a domestic gas reservation policy on the East Coast would lower prices, Mr Bowen said the review would “work all these issues through”.

“I’m not announcing the results of the review that I announced just yesterday,” he said.

But he repeated a pledge not to rip up existing export contracts, creating sovereign risk, or to engage in actions that would put Australia at risk of being viewed as an unreliable supplier.

The Australian Energy Producers, a key industry body representing the gas sector, said it supported Government efforts to create a long-term stable regulatory environment to facilitate investment in new supply and put downward pressure on prices.

“Natural gas will play a critical role in Australia’s energy mix for decades to come. The east coast gas market needs to be fit-for-purpose to support continued investment in our abundant gas resources and avoid projected shortfalls,” said Chief Executive Samantha McCulloch.