How effective are the existing instruments in ensuring sufficient supply of natural gas for Australia’s domestic gas market, including impacts on the exploration and development of new gas resources?

The Australian Domestic Gas Security Mechanism (ADGSM), gas Heads of Agreement (HoA) and Mandatory Gas Code of Conduct (Code) have been important responses to the severe risks facing domestic gas supply security in the wake of the opening of Liquefied Natural Gas (LNG) exports from Eastern Australia. They have made some difference over time.

The ADGSM was first introduced in 2017 as the Turnbull Government became alarmed about the plight of Eastern industry, which was facing soaring prices and risk of short supply. The initial version of the ADGSM was very difficult to actually use effectively (though more recent reforms have made it possible to deploy, albeit still as an absolute last resort), but it encouraged LNG exporters to seriously participate in the discussions that led to the first HoA.

That agreement did reshuffle gas supply commitments in a way that moderated supply pressures, though gas prices remained high until shortly before the pandemic. The Code, introduced in response to the price extremes that followed the invasion of Ukraine, coincided with a settling down of gas prices – though to levels that remain above all pre-Ukraine experience.