An Australian Government review of the Australian Domestic Gas Security Mechanism (ADGSM) has revealed that the initiative has helped lower domestic gas prices while contributing to more secure gas supplies.
The Liberal/Nationals Government introduced the ADGSM in July 2017 to help guarantee domestic gas supplies with forecasted shortages caused by growing exports and reduced production from gas fields offshore Victoria.
Australian Resources Minister Matt Canavan said the review confirmed the measures taken by the government in 2017 had been instrumental in stabilising the domestic gas market and keeping a lid on gas prices.
According to the review, the findings on the ADGSM’s effectiveness are supported by the competition watchdog the Australian Competition and Consumer Commission (ACCC) and Australia’s energy market bodies including the Australian Energy Market Operator (AEMO) and the Australian Energy Regulator (AER).
As a result, gas offers are now half the peak prices of over $20 per gigajoule from early 2017, before the ADGSM was introduced. At the Wallumbilla Gas Supply Hub, Queensland, short-term gas prices have dropped by 46 per cent between February 2017 to December 2019.
Prices at Wallumbilla averaged $6.71 per gigajoule in December 2019 compared with the February 2017 average price of $12.49 per gigajoule.
“However, I recognise that some businesses are still finding it difficult to get longer term gas offers and that some price offers remain higher than I want to see, especially when international LNG prices are low,” Canavan said.
“That is why we will keep the ADGSM in place until its scheduled end in 2023 and the ACCC will continue to monitor the gas sector out until 2025.
“In addition, I am going to work with states and territories during the next 12 months to consider options to establish a prospective national gas reservation policy. We can’t repeat the mistakes of the past in just letting our gas be shipped overseas with no thought to our domestic requirements.”
Canavan said his main priorities were to be mindful of the major contribution the LNG sector had made to energy security in homes and creating jobs in regional and rural communities.
The review also recommends that the government strengthens the ADGSM’s mechanism for securing domestic gas – the Total Market Security Obligation (TMSO) and that the ADGSM’s guidelines include the ACCC’s LNG netback price series as a signal of how well a market is functioning in estimating any potential supply shortfall.