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Energy update | 22 July 2022
21 Jul 2022
Extension of the Australian Gas Market Security Mechanism
The Department of Industry Science and Resources recently called for submissions on the proposed extension of the Australian Gas Market Security Mechanism to 2030.
The ADGSM, which is set to expire on January 1, 2023, aims to ensure that there is sufficient supply of natural gas to meet the forecast needs of Australian gas consumers. If a shortfall in the supply of natural gas is forecast, the ADGSM gives the Minister for Resources, at her discretion, the power to direct LNG projects that are drawing gas from the domestic market to either limit exports or find offsetting sources of new gas, to make up any domestic shortfall.
Following the recent east coast gas crisis, where the Australian Energy Market Operator was forced to step in, directing gas producers to make gas available to domestic customers and capping gas prices at $40/GJ (four times what commercial and industrial gas users were paying only a few weeks earlier). But, these prices are unsustainable, with C&I gas users under extreme pressure and many will be forced to close their doors or leave Australian shores if the price pressures cannot be relieved shortly.
ACCI’s submission calls on the Minister to activate the ADGSM immediately and to extend it beyond 2023, until such time as a functional gas market is restored. But we argue that the ADGSM is, and can only be, a temporary stop-gap measure while a more comprehensive national gas strategy is developed and implemented. The national gas strategy must focus on achieving a functioning gas market that is a competitive, efficient and effective.
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