Australian state rethinking gas market settings to secure supply and boost investments

July 8, 2025, by Dragana Nikše

The Government of Australia’s State of Victoria has opened a review into the legislation governing the gas market to ensure a sufficient and affordable gas supply in the longer term.

Illustration; Source: Australian Energy Producers

The Government plans to reexamine key measures introduced by previous administrations to help inform its Future Gas Strategy, which maps the Australian Government’s plan for how gas will support the economy’s transition to net zero in partnership with the world.

As part of the review, industry, stakeholders and the public will be consulted on matters such as the Australian Domestic Gas Security Mechanism (ADGSM), the Gas Market Code, and the heads of agreement signed with major east coast gas exporters.

The latter was signed in 2022 to supply sufficient, competitively priced gas to Australian users, and remains in place until January 1, 2026.

The Government said the goal of the review is to determine ways to improve these instruments and strengthen them to ensure a sufficient affordable gas supply in the longer term in Australia’s east coast, a region which has experienced price and supply issues in the past.

One of the major objectives will be to streamline instruments and create a long-term stable regulatory environment while supporting domestic energy security and affordability. The Government said it will also consider the role of the various market bodies, and determine best practices to encourage sustainable investment that improves the supply outlook and has a potential to lower prices.

Minister for Resources and Northern Australia Madeleine King noted: “Our gas market settings have evolved over time and in response to a crisis of supply or price, or both, so the intent of this review is to carefully examine how our gas policies work for our economy as part of our energy transition.

“The Gas Market review aligns with implementation of the Future Gas Strategy and underpins the government’s commitment to ensure householders and businesses can continue to have access to adequate supplies of affordable energy.

Minister King feels that Australia has an important reputation as a global supplier of energy and a key partner in ensuring energy security in the region. The review also aims to examine potential ways to attract more sustainable investment into the Australian industry to support jobs and economic wellbeing.

Australian Energy Producers (AEP) welcomed the Federal Government’s announced review.

“The review is an opportunity to future-proof the east coast gas market and ensure reliable and affordable gas supply for Australian households and manufacturers. Natural gas will play a critical role in Australia’s energy mix for decades to come. The east coast gas market needs to be fit-for-purpose to support continued investment in our abundant gas resources and avoid projected shortfalls,” noted AEP Chief Executive Samantha McCulloch.

McCulloch added that the Government’s Future Gas Strategy makes clear that natural gas will remain critical to Australia’s energy security through to 2050 and beyond. According to her, this requires a strong, stable, and competitive east coast gas market that encourages investment and timely supply.

The Australian Competition and Consumer Commission (ACCC) also published its Gas inquiry June 2025 interim report, highlighting once again that short-term gas supply is sufficient, but pointing out that further investments are needed in the longer term.

Based on the ACCC’s report, the east coast gas supply outlook for 2025 and 2026 has deteriorated despite an easing in gas prices in the second half of 2024. The report noted that there is a risk of shortfall in Q4 2025 and throughout 2026 if LNG producers from Queensland export all uncontracted gas.

Additionally, the report states that there are sufficient gas reserves and resources to meet projected domestic demand for at least the next decade. However, these have not been developed yet due to a combination of policy, technical, and commercial factors.

As for the medium-term outlook, no change is registered, and structural shortfalls on the east coast are still projected from 2028 unless new gas supply is brought online.

Following ACCC’s last report from April, Minister King determined that a domestic gas shortfall from July to September 2025 is not likely and the ADGSM was not activated. Described as a measure of last resort, the mechanism ensures there is sufficient natural gas supply to meet the needs of Australian energy users if a gas supply shortfall is forecast for the country.