22 Aug 2019

Review of Australian Domestic Gas Security Mechanism underway, and closes soon

By Linda Evans, Paul Burton

The review is being conducted by the Department of Industry, Innovation and Science and is expected to be completed by the end of September 2019.

The Australian Government has brought forward the scheduled review of the Australian Domestic Gas Security Mechanism (ADGSM) to this year.

This review had been scheduled for 2020, but given the major changes in global gas markets over the past six months, the Government has announced it is bringing the review forward.

The purpose of the review is to assess whether the ADGSM, which came into effect on 1 July 2017, remains fit for purpose to deliver a functional domestic gas market with low prices for consumers and strong investment in new gas production.

Submissions close 31 August 2019 and can be made via the Government’s Consultation Hub at: https://consult.industry.gov.au/resources/australian-domestic-gas-security-mechanism-review.

The Terms of Reference of the Review are:

  • The effectiveness and efficiency of the ADGSM in ensuring a sufficient supply of natural gas for Australian consumers with minimum disruption to Australia’s liquefied natural gas export industry;
  • The impact of the ADGSM on the competitiveness of Australia’s liquefied natural gas export industry, Australia’s investment reputation and Australia’s international reputation for quality and reliability;
  • The impact of the ADGSM on the Australian domestic gas market, including the development of new and additional gas resources and market functions;
  • Whether improvements can be made to the operation of the ADGSM and whether there are appropriate alternative mechanisms to achieve the objectives of the ADGSM;
  • Whether the ADGSM should be amended or repealed before 1 January 2023 and the timing of any such amendment or repeal; and
  • The review will examine other relevant considerations, including investigating the ongoing appropriateness of the ADGSM’s Total Market Security Obligation arrangements and the ACCC’s Netback Price series.

The review is being conducted by the Department of Industry, Innovation and Science and is expected to be completed by the end of September 2019.

Separately, the Government is also considering options to establish a prospective national gas reservation scheme. Between now and February 2021 the Government will examine whether a reservation scheme could succeed and be applied at a national level.

Finally, the Government has also announced it will be extending the role of the ACCC in monitoring and publishing data on Australian gas markets until December 2025; its published reports can be found here.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.