PERTH (miningweekly.com) – The federal government is calling for feedback on reforms to the Australian Domestic Gas Security Mechanism (ADGSM) that will ensure Australia has enough gas to meet domestic demand while protecting long-term international contracts.

The ADGSM was designed by the previous government and is a measure of last resort which allows the government, in the event of a predicted shortfall, to restrict exports to ensure enough gas is available for domestic use.

The ADGSM was last year formally extended until 2023, ensuring the federal government could use the mechanism to safeguard domestic gas supply. However, Resources and Northern Australia Minister Madeleine King said the mechanism was not best suited to deal with the energy crisis currently facing Australia.

King said reforms to the mechanism, due to start on April 1, will ensure the government has more flexibility to use the mechanism, if needed, in the event of a forecast shortfall in domestic supply.

“The changes we announced last year, after widespread consultation with stakeholders, will deliver more flexibility and mean decisions to activate the ADGSM can be made every quarter, rather than only once a year under the old regulations,” King said.

“The changes will balance the need to guarantee sufficient domestic gas supplies while safeguarding Australia’s global reputation as a stable and reliable supplier of energy to regional partners.

“The best protection for long-term contracts is a situation where the domestic market is well supplied and there is not a predicted domestic shortfall.”

The consultation closes on 23 February 2023.

The ADGSM works together with the voluntary, industry-led Heads of Agreement between the Commonwealth and the east coast liquefied natural gas (LNG) exporters under which an additional 157 PJ of gas is committed to the domestic market in 2023.

The government is also considering a mandatory code of conduct for the wholesale gas market that includes a reasonable pricing provision, accelerating the introduction of the ADGSM, and boosting resources for the Australian Competition and Consumer Commission (ACCC) for implementation, monitoring and enforcement.

The code will apply to contracts between gas producers and their customers in the east coast market, and the government will undertake consultation on the scope of the code and whether it should be expanded to wholesale contracts sold by other market participants. The ACCC will continue to closely monitor and report on the behaviour of all market participants, including energy retailers, and take enforcement action where required to ensure competition across the market.

The code will include a provision for reasonable pricing. This will provide a basis for producers and buyers to negotiate domestic wholesale gas contracts based on guidance on reasonable pricing from the ACCC, which will reflect the long-run costs of domestic production and an appropriate return on capital. If producers and buyers are unable to agree, they may seek a binding arbitration determination.