Fuel for thought: what the gas market review means for Australia's energy landscape

On 30 June 2025, the Federal Government released a Gas Market Review Consultation Paper, announcing a review of the rules governing Australia's gas markets. The Review will examine key instruments that are used to secure domestic gas supply and determine whether the regulations can be improved and streamlined to ease current supply pressures.

The Government is seeking feedback from industry and stakeholders on the current regime. Submissions are due on 5pm Friday 15 August 2025.

Current regulatory landscape for Australia's gas market

Recognising that natural gas will continue to play an important role in Australia's domestic energy mix, the Federal Government has taken steps to intervene in the east-coast domestic market in an effort to procure sufficient supply of natural gas for the domestic market and to keep prices as low as possible for domestic consumers.

To achieve its policy goals with respect to gas supply, the Federal Government has implemented the following three key mechanisms:

• Gas Market Code – which aims to ensure adequate supply of wholesale gas at reasonable prices and on reasonable terms by:

  • imposing price rules prohibiting the supply of gas above a "reasonable price" (currently $12 per gigajoule (GJ));

  • imposing certain requirements for the conduct of negotiations with respect to the supply of gas;

  • requiring parties to act in good faith when negotiating gas supply agreements; and

  • implementing strict record keeping, reporting and publication obligations (administered by the Australian Competition and Consumer Commission (ACCC);

• Australian Domestic Gas Security Mechanism (ADGSM) – under which the Government may restrict the export of gas as LNG where there is a "shortfall quarter" (ie., where total demand for gas is forecast to exceed the forecast supply over a particular quarter). This is considered to be a power of "last resort" and has not been triggered by the Minister since its introduction; and

• Heads of Agreement (HoA) with major east coast LNG exporters – a mechanism which aims to safeguard domestic supply of LNG and prevent a gas supply shortfall by requiring, among other things, LNG exporters to offer uncontracted gas to the domestic market, for reasonable supply periods, with reasonable notice on competitive market terms and prices no more than international customers will pay, before being offered to the international market as LNG.

What has prompted the Review?

The Consultation Paper notes that gas forecasting suggests that the next five to ten years are critical to Australis gas supply security.

The Consultation Paper recognises that gas market is undergoing structural change, particularly on the east coast, and that national gas demand is expected to remain steady but the profile of demand changing over time (with a reduction in residential and commercial demand towards greater consumption for gas powered generation). On the east coast, large legacy fields are nearing end of field life, but new gas supply is not replacing existing production at the same pace, and LNG import terminals are entering the mix. In Western Australia AEMO forecasts the potential for supply shortfalls from 2030.

The paper states that Australia cannot rely on past investment to secure is future energy needs and continued investment is required to meet demand.

Key areas for consultation

The Review aims to examine the effectiveness and coherence of the Code, ADGSM and the HoA. It will also consider the current roles and responsibilities of the various market bodies including the Australian Energy Regulator (AER), Australian Energy Market Operator (AEMO), and the ACCC in gas market regulation.

The Consultation Paper sets out the following areas in which the Federal Government is requesting submissions from industry participants:

• Supply, security and trade – the Government is exploring options to simplify and consolidate existing gas market regulations to encourage the exploration and development of new gas resources and infrastructure, while maintaining the competitiveness of Australia's LNG export industry. Potential measures include consolidating HoA obligations into the Code or establishing a national framework for LNG export permits with domestic supply conditions.

• Contracting and bargaining power imbalances –the Federal Government is considering measures such as improving the Expression of Interest (EOI) and offer process in the Code and HoA, as well as introducing a standardised GSA template, which could be either voluntary or mandated by the Code, to address a reported imbalance in contracting and bargaining power by commercial and industrial gas users.

• Gas market transparency – the Department of Climate Change, Energy, Environment and Water (DCEEW) is proposing amendments to the National Gas Rules to transfer the GSA reporting function from the ACCC's Gas Inquiry, which operates on a quarterly basis with a six-month data lag, to a market body such as the AER or AEMO. The goal is to establish a central repository for gas market information that operates in closer to real-time, while also reducing the reporting burden on industry participants.

• Wholesale gas prices – the Government is assessing whether the Code's reasonable price mechanism effectively reduced gas prices and price volatility, and whether the current reasonable price of $12/GJ accurately reflects actual supply and demand conditions.

• Efficient wholesale markets – with 70 to 90% of gas in Australia traded through wholesale bilateral contracts, the government is exploring potential reforms to AEMO's facilitated markets to promote greater participation and address inefficiencies. Proposed measures include the introduction of virtual trading hubs, anonymising trade in the Gas Supply Hub (GSH), and reforming AEMO's prudential requirements to reduce barriers to participation.

• Governance of gas market regulations – assessing whether the current roles and responsibilities of the AER, AEMO and ACCC in gas market regulation and reporting are adequate, appropriate, and both efficient and effective.

Regarding the degree of change for each of these potential options, the government is considering how to implement the recommendations it receives, with three categories in mind: minimal change, incremental change, or fundamental reform. An example of these three categories has been extracted from the Review and is below.

Of particular note, the fundamental reform options include:

• a national framework requiring all exports of LNG to be approved subject to conditions;

• standardised key terms for contracting between buyers and producers through a standard form Gas Supply Agreement;

• abolishing the procedural requirements for negotiations with respect to the supply of gas under the Code;

• a new framework to secure domestic gas supply commitments, potentially encompassing domestic supply and pricing considerations (eg. a domestic gas reservation);

• a mandatory market making scheme; and

• introduction of new markets or market functions (including one or more virtual trading hubs).

Additionally, a consolidated list of consultation questions on the areas outlined above are provided in Appendix 1 of the Consultation Paper. Stakeholders are encouraged to provide responses to these questions and submit them via the DCEEW's Consultation Hub. These questions are broad in nature and, for example, include the following in respect of supply, security and trade:

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

Have the instruments affected the competitiveness of Australia’s LNG export industry, investment reputation or international reputation for quality and reliability? If yes, please provide detail."

Submissions will close at 5pm on 15 August 2025.