In response to concerns associated with rising prices for the domestic supply of natural gas, coupled with concerns about potential supply shortfalls, the Malcolm Turnbull led Coalition Government introduced the Australian Domestic Gas Security Mechanism (ADGSM) with much fanfare in July 2017.
The ADGSM gives the Federal Minister the power, via the Customs Act 1901 (Cth), to restrict exports of liquefied natural gas (LNG) in a 'domestic shortfall year'. A domestic shortfall year is one in which it is considered that:
- there will not be a sufficient supply of natural gas for Australian consumers during the year unless exports are controlled; and
- the exports of LNG would contribute to that lack of supply.
Since the introduction of the ADGSM, the Minister has engaged the mechanism’s investigative powers, but has not enlivened export controls by declaring a domestic shortfall year. In late 2017, however, the Federal Government and east coast LNG exporters signed a Heads of Agreement committing the exporters to, among other things:
- not offer gas for export until it has been offered for sale domestically; and
- offer uncontracted gas to the domestic market, on reasonable terms, in order to meet any shortfall; and
- discuss with, and provide information to, AEMO and the ACCC on issues regarding the market balance and sales of gas.
The ADGSM regulations require a review of the ADGSM during 2020. The review is required to assess the ADGSM against a number of terms of reference, including:
- the effectiveness and efficiency of the ADGSM in ensuring a sufficient supply of natural gas for Australian consumers with minimum disruption to Australia’s natural gas export industry;
- whether improvements can be made to the ADGSM, and
- whether there are appropriate alternatives; and whether the ADGSM should be repealed.
In August 2019, the government announced its decision to bring the review of the ADGSM forward. Although the ADGSM can be applied nationally, in light of the fact that only the east coast gas market has experienced recent supply concerns, the review focussed on this market.
The findings from the review of the ADGSM were published by the Department of Industry, Innovation and Science on 24 January 2020.
