Australia gas market interventions coming up short, regulator finds

SYDNEY, Oct 1 (Reuters) - The Australian government’s recent attempts to bolster domestic gas supply and force down prices have been largely ineffective and may even be exacerbating the risk of a shortfall, the competition regulator said on Wednesday.

The Australian Competition and Consumer Commission (ACCC) said in a report that a raft of gas market interventions made in response to the 2022 global energy crisis had “not resulted in a material improvement in market outcomes”.

Those measures included changes to the Australian Domestic Gas Security Mechanism and a Heads of Agreement with the three east coast liquefied natural gas exporters to first offer any uncontracted gas volumes to the domestic market.

The government also introduced a gas industry code and a A$12 ($7.91) per gigajoule cap on wholesale prices for all producers on the east coast.

While some additional gas had been supplied into the domestic market, the ACCC said there was no “material improvement in long-term energy security, reliability, or affordability to date”.

For example, the pact with QCLNG, run by Shell SHEL.L, APLNG run by Origin Energy ORG.AX, and GLNG run by Santos STO.AX, is voluntary and commits producers only to make offers to rather than supply the domestic market, the ACCC said, limiting its impact.

The report also found that changes to the gas supply mechanism in 2023 had caused “inefficiencies” by reducing incentives for LNG producers to make a net contribution to the domestic market and to produce uncontracted gas.

“These changed incentives appear to have had the unintended consequence of exacerbating the risk of domestic supply shortfall,” it said.

The ACCC said there was the risk of a gas shortage in Australia’s southern states in the second and third quarter of 2026.

Australia exports more gas than it consumes, but its major reserves are located mostly in the northwest, far from the southeast where most people live and demand is highest.

($1 = 1.5170 Australian dollars)