A mandatory industry code of conduct is expected to make gas available for Australian users at “reasonable” prices for the next two years.
The gas industry says the test for the code will be whether it supports urgently needed investment to bring on new gas supply to avert future shortfalls and put downward pressure on prices.
Coupled with price caps on coal for power generators, the federal government says intervention has almost halved wholesale energy prices after crippling price spikes added to the cost of living pressures.
Announcing the code on Wednesday, Treasurer Jim Chalmers said it would give producers the certainty they needed to invest in production and ensure export commitments were met.
He said the final design secured additional domestic supply commitments in the short term to cap prices and shield east coast gas consumers from further international price spikes.
Dr Chalmers said the code would ensure domestic prices were “reasonable” by establishing the price anchor—a mechanism to drag prices down.
This would be done via the combination of a price cap set at $12 a gigajoule and a process for qualifying for exemptions from the price cap.
Opposition resources spokeswoman Susan McDonald said suppliers and investors have no detail about a legally enforceable code that they will have to implement within weeks.
“Today’s announcement provides no certainty, no details, and no timeline for an industry that has faced more than six months of uncertainty under this government’s failed gas market interventions,” she told AAP.
Senator McDonald said it would only heighten the concerns of trading partners who want confidence the government will back the gas industry, because their own energy security relies on it.
Resources Minister Madeleine King said customers in Japan, South Korea and Singapore were also long-term investors in Australia, and those governments and others have been “updated constantly”.
“These governments understand our need for energy security,” she told ABC TV.
“We also acknowledge the importance of Australia’s role in providing that energy security to our region.”
Producers have offered indicative domestic supply commitments under the new framework of at least 260 petajoules to 2027, which regulators say reduces the risk of shortfalls.
“There are large financial penalties that would apply if they don’t supply that gas, but I don’t expect any of these companies would do that,” King said.
The code allows small producers of gas to be exempt from the price cap if they only supply the domestic market.
It also requires all participants to abide by standards of conduct to level the playing field in contract negotiations between users and producers.
The full gas code will be released in the coming weeks, and its effectiveness will be reviewed in mid-2025.
“We await the final text of the code to fully understand whether the industry’s concerns and recommendations have been addressed,” Australian Petroleum Production and Exploration Association chief executive Samantha McCulloch said.
