Gas Market Review 2025: turning the valve on Australia’s gas settings

The Australian Government has released the findings of its Gas Market Review, a comprehensive assessment of Australia's gas market regulations overseen by the Department of Climate Change, Energy, the Environment and Water (DCCEEW) and the Department of Industry, Science and Resources (DISR).

The Review's report, released on 22 December 2025, (Report) recommends fundamental reforms to Australia's gas policy settings, including a domestic gas reservation scheme designed to address structural shortfalls, market power dynamics, and provide long-term regulatory certainty. While details are still to be decided, this scheme is intended to replace existing mechanisms such as the Australian Domestic Gas Security Mechanism (ADGSM), the Conditional Ministerial Exemption (CME) regime and $12 price cap under the Gas Market Code of Conduct (Code), and the Heads of Agreement with the East Coast LNG Exporters (HoA). The Ministers responsible for the Review have suggested that the gas reservation scheme will require exporters to reserve between 15 and 25 per cent of gas production for the domestic market.

Key observations

• The detailed design and implementation of the domestic gas reservation scheme remain subject to further consultation, with key parameters yet to be finalised.

• The Report states that the domestic gas reservation scheme "could be guided by" the principle that it is not intended to apply retrospectively, with existing contracts (i.e. entered into before 22 December 2025) respected, both domestic and international, and only new agreements subject to the scheme’s requirements.

• The Report also recommends exploring a range of complementary measures, including the following notable domestic market conduct and efficiency options:

• Requiring uncontracted and reserved gas transactions for supply up to 12 months via the Gas Supply Hub (GSH) and periodic auctions;

• Introducing a market maker regime and/or periodic auction process to improve liquidity on the GSH or, if established, on a forward trading market on the Victorian DTS;

• Amending the code to require gas sales and marketing based on upstream equity interests, not joint venture vehicles;

• Asking the ACCC to work with gas buyers to raise awareness of competition law mechanisms to facilitate collective negotiations by buyers.

• Public consultation on the design of the domestic gas reservation scheme is planned for an immediate start in 2026, with implementation targeted for 2027. In the meantime, the Review suggests that a short extension to the HoA between the east coast gas exporters could be negotiated to cover the period until the recommendations of the review are implemented.

Background to the Review

Australia’s gas market is undergoing a period of significant transition, shaped by both domestic and international pressures. On the east coast, long-standing gas fields are nearing depletion, and new supply projects are not materialising quickly enough to replace lost production, leading to concerns about future supply shortfalls emerging in 2029. At the same time, demand for gas is shifting: residential and commercial consumption is expected to decline in the long term with usage moving towards higher value and non-substitutable gas uses and gas-powered generation is forecast to play a more prominent role, particularly in managing peak electricity demand during winter. The west coast, meanwhile, has seen a temporary improvement in supply outlook due to increased production and reduced industrial demand, but faces the risk of structural shortfalls from 2030 as new industrial projects come online. Overlaying these supply and demand dynamics are broader challenges related to retaining Australia's reputation as a reliable supplier to international markets, balanced with the need to secure affordable gas for domestic consumers. Investment in new gas infrastructure is critical, but is complicated by regulatory uncertainty and shifting policy settings.

The Report acknowledges that Australia has benefited from the development of a Liquefied Natural Gas (LNG) export industry through investment, export revenue, royalties and taxation, job creation, and economic development. It also recognises the importance of LNG export industry to Australia's energy security: enabling development of gas resources that would otherwise not have been commercially viable. The importance of the LNG export industry is expected to increase, with many long term LNG export contracts expiring over the next 10 years.

The Gas Market Review was undertaken by the Australian Government to assess the effectiveness and coherence of key gas market regulations and policies. The Review aimed to ensure that Australia’s gas market framework continues to deliver reliable, affordable, and secure gas supply for households and businesses, while supporting efficient investment, market stability, and the transition to net-zero emissions. It examined whether current instruments are fit for purpose in addressing supply, security, market conduct, transparency, pricing, and the efficiency of wholesale markets. These current instruments are:

• Competition and Consumer (Gas Market Code) Regulations 2023. Introduced in July 2023, the Code aims to ensure adequate supply of wholesale gas at reasonable prices and on reasonable terms for the domestic market. It sets a reference price of $12 per gigajoule (GJ) as the initial benchmark and establishes mandatory rules regarding market conduct and transparency, including requirements for producers to publish information on expressions of interest and uncontracted gas, negotiate in good faith, and issue initial and final offers. The Code also provides for Conditional Ministerial Exemptions, which allow producers to be exempt from certain price or conduct provisions if they commit additional volumes to the domestic market or provide development commitments. As of the latest forecasts, up to 644 PJ of additional domestic supply has been secured under these exemptions.

• Australian Domestic Gas Security Mechanism (ADGSM). The ADGSM commenced on 1 July 2017 and provides the Minister for Resources with the authority to restrict LNG exports if a forecast indicates a potential shortfall in domestic gas supply. The mechanism is intended as a measure of last resort to ensure sufficient natural gas remains in Australia to meet the needs of domestic energy users. While the ADGSM has never been activated, the Review notes that the potential for the ADGSM to be used has influenced the behaviour of LNG exporters by disincentivising gas export commitments if there is a risk of a domestic market shortfall.

• Voluntary HoA with east coast LNG exporters. Renewed in 2022 and currently in place until 1 January 2026, the HoA requires LNG exporters to offer any uncontracted gas to the domestic market for reasonable supply periods with reasonable notice, on competitive market terms at prices no more than international customers will pay, before being offered to the international market. The HoA is monitored by the Department of Industry, Science and Resources and the Minister for Resources meets with each of the LNG exporters quarterly to review compliance. The ACCC also monitors these commitments and reports on compliance in its Gas Inquiry interim reports.

As the sunset or review clauses for the Code, the ADGSM, and the HoA all fall between 2025 and early 2026, the Government initiated a comprehensive Gas Market Review rather than simply extending existing rules.

Scope and process

The Review was tasked with evaluating the effectiveness and coherence of the Gas Market Code, the ADGSM, and the HoA, considering how these instruments interact and whether they remain suitable for the evolving needs of the Australian gas market. Key considerations for the Review, as set out in the terms of reference, included:

• Domestic gas supply – ensuring there is sufficient natural gas supply to meet the needs of Australian energy users and place downward pressure on domestic gas prices.

• Reasonable gas prices – assessing if domestic gas prices align with market fundamentals and the Code's pricing provisions.

• Market transparency – improving price and supply information while minimising reporting burdens.

• Market conduct and good faith rules – addressing rules designed to reduce bargaining power imbalances.

• Competition in both the gas supplier and user markets – considering impacts on bargaining power, supply, and pricing, especially for Commercial and industrial (C&I) users.

• Impacts on Australia's LNG exports, investment reputation, and international trade standing.

• Roles of market bodies – including the Australian Energy Market Operator (AEMO), the Australian Competition and Consumer Commission (ACCC), and the Australian Energy Regulator (AER) in governance, data, reporting, and implementing mechanisms.

The Review invited submissions from a wide range of participants. The insights and perspectives gathered through this consultation informed the preparation of the Report, which was recently delivered to the Government.

Key findings

Supply, security and trade

• Shortfalls are forecast despite abundant Australian gas reserves and resources. New sources of gas and increased production are needed to meet demand during transition to net zero. Regulatory barriers to investment in new gas supply and infrastructure projects must be addressed to support this.

• The existing regulatory instruments provided signals to market participants to respond to forecast short-term short falls by increasing supply, but they cannot directly guarantee or direct supply and they do not provide sufficient long-term certainty for investment.

Pricing

• Greater commitments to domestic supply from LNG and domestic producers as a result of Government intervention (combined with lower international prices) have led to lower domestic gas prices since the extremes of 2022. However, the east coast remains vulnerable to international price volatility.

• The $12/GJ "reasonable price" cap under the Code has not been sufficient to put downward pressure on prices.

Market conduct and efficiency

• Currently, 90% of gas is traded through bilateral contracts. While producers are generally acknowledged to have negotiated these agreements in good faith, wholesale gas markets remain highly concentrated.

• C&I users often have limited options when seeking gas supply contracts, reducing their ability to negotiate competitive outcomes.

• In this context, the existing regulatory instruments have not substantially improved the bargaining power or confidence of C&I users.

• Gas is increasingly sold under short-term contracts (ie. less than 12 months) and flexibility of non-price terms (including volume flexibility) under long term gas supply agreements is declining.

• Efficient, short-term, centralised markets will become increasingly important.

 Market transparency

• Price and available gas supply transparency is fragmented.

• Smaller market participants are required to form price expectations on the basis of incomplete, dated and asymmetric price information (whereas larger gas suppliers have the benefit of the wider pool of participants in bilateral contract negotiations).

• Available gas supply information is often disparate, unreliable and dated, and gives favourable access to participants with pre-existing bilateral relationships.

• The Code and HoA transparency obligations have not materially improved access to information around available gas supply.

Market governance and reporting

• The reporting obligations outlined in gas market regulations have provided regulators and policymakers with a comprehensive understanding of gas markets. However, these requirements are duplicative and have imposed an undue regulatory burden on gas market participants.

• Eliminating the HoA and the ADGSM would alleviate the reporting burden faced by east coast LNG exporters.

• Duplicative reporting requirements are further compounded by limited information-sharing arrangements between regulators.

Reform pathways set out in the Review's Report

The Report makes 18 recommendations for reform relating to supply, pricing, market conduct and efficiency, reporting and transparency.

Fundamental reform is required

After assessing three options for reform, which include retaining the current regulatory framework, implementing targeted incremental changes such as removing the reasonable price mechanism in the Code, and pursuing comprehensive reform through the introduction of a domestic gas reservation scheme, the Report concludes that only fundamental reform, centred on a domestic gas reservation scheme, will effectively address structural supply shortfalls and provide the regulatory certainty needed to ensure long-term market stability.

Domestic gas reservation scheme

The Report's principal recommendation is the introduction of a domestic gas reservation scheme, accompanied by the removal of the ADGSM, HoA, and the pricing provisions and CME framework within the Code.

The existing HoA requirement to "offer" uncontracted gas to the domestic market before export would be replaced, by an amendment to the Code, with a firm obligation to "supply" reserved volumes to the domestic market. A short extension of the HoA would be negotiated pending implementation of the Review's recommendations.

If the scheme requires export approvals, exporters would need to meet domestic supply obligations before exports are approved.

The key features of the proposed domestic gas reservation scheme are:

• Existing domestic and export contracts would be respected.

• National in scope (i.e.. applies to the east coast and west coast gas markets).

• Works in tandem with federal, state and territory gas market mechanisms.

• Commencement in 2027.

• Producers would have flexibility to meet domestic and export obligations through a variety of standard commercial/market based arrangements, including contracting with exporters or domestic producers.

• Encouraging long-term domestic gas supply contracts, including C&I users and supporting gas infrastructure providers.

• Clearly setting domestic supply requirements well in advance of establishment.

The Ministers responsible for the Review suggested in a joint media release on 22 December 2025 that the gas reservation scheme will require exporters to reserve between 15 and 25% of gas production for the domestic market. It was also communicated that contracts entered into before the announcement of the gas reservation scheme would be recognised as "existing contracts" but any contracts signed after 22 December 2025 would not. It is yet to be seen whether existing contracts can be extended and maintain their protected status.

The Review recommends public consultation on the detailed design of reforms and a reservation scheme, during which producers can work with Government to ensure they have adequate supply in place to meet their domestic market obligation by the time the scheme commence.

Complementary reforms

The Report also recommends exploring a suite of complementary reforms to streamline and consolidate regulatory frameworks, enhance market transparency, and improve the efficiency of gas trading. These include:

Supply, security and trade

• implementing Stage 2 of the East Coast Gas Market Reliability and Supply Adequacy reforms;

• expanding AEMO’s powers to enable it to better address gas infrastructure constraints in the east coast market;

• encouraging private sector investment in pipeline networks and storage to ensure reserved gas can be transported and stored near demand centres at sufficient capacity;

• amending the National Gas Law (NGL) to extend greenfield gas pipeline regulatory exemptions to brownfield projects which expand capacity to incentivise developments and enable greenfield and brownfield projects to seek exemptions for the Day Ahead Auction to incentivise foundation customer contracting;

Gas price

• phasing out the Code's reasonable price mechanism and CME framework, subject to introduction of the gas reservation scheme and appropriate transitional arrangements;

• where the impact of a gas reservation scheme does not sufficiently reduce prices for industrial users who are critical to Australia's sovereign interests, considering other options to ensure continued operation (this presumably includes subsidies);

Market conduct and efficiency

• removing the existing EOI process set out in Parts 3 and 4 of the Code, replacing it with new flexible principles-based requirements for selling practices;

• amending the Code to require uncontracted and reserved gas transactions for supply up to 12 months be undertaken via the GSH and periodic auctions, where this does not raise transaction costs;

• working with states, territories and AEMO to expand the scope of the GSH to a full virtual hub to enable greater on-market participation and liquidity, with the possibility of geographic expansion across the east coast;

• establishing a forward trading market on the Victorian Declared Transmission System (DTS);

• introducing a market maker regime and/or a periodic auction process in the Code targeted at improving liquidity on the GSH or (if established) on a forward trading market on the Victorian DTS;

• amending the Code to require gas sales and marketing based on upstream equity interests rather than joint venture vehicles;

• asking the ACCC to work with gas buyers to raise awareness of competition law mechanisms to facilitate collective negotiations by buyers;

Market transparency

• expanding AEMO's reporting remit on the Gas Bulletin Board (GBB), supported by timely and appropriate information sharing arrangements with other energy market bodies and the ACCC (minimising duplicative information collection), including publishing near real-time transaction metrics and establishing an east coast forward price index;

Market governance and reporting

• making the AER as the responsible regulator for administering Commonwealth gas market regulations (including the Code);

• consolidating market monitoring, analysis and reporting of gas markets through the AER; and

• subject to an appropriate transition period to allow for the proposed reporting and transparency reforms involving the AEMO and the AER, discontinuing the ACCC Gas Inquiry in its current form (with any future inquiries by the ACCC into matters relating to gas limited to short-term, focused reviews).

The Report also recommends that the Government formulate a transition plan that specifies the timeline and scope for amending or removing existing regulations, while also providing a clear pathway for market participants to comply with the requirements of the domestic gas reservation scheme.