The Australian Government seeks a gas market that:
- benefits all Australians
- strengthens our economy through liquefied natural gas (LNG) exports
- delivers competitive domestic gas prices.
Australian Domestic Gas Security Mechanism
The Australian Domestic Gas Security Mechanism (ADGSM) is in place to ensure there is sufficient natural gas supply to meet the forecast needs of Australian energy users. The ADGSM is a measure of last resort.
If a gas supply shortfall is forecast for Australia, liquefied natural gas (LNG) projects may need to limit exports or find new gas sources.
The Minister for Resources is responsible for determining whether a shortfall market exists. Their decision is informed by expert advice from:
- the Australian Energy Market Operator (AEMO)
- the Australian Competition and Consumer Commission (ACCC)
- industry and other government sources.
Legal framework, operations and guidelines
The ADGSM came into effect on 1 July 2017 and is included within Division 6 of the Customs (Prohibited Exports) Regulations 1958.
Find details about ADGSM operations in the Customs (Prohibited Exports) (Operation of the Australian Domestic Gas Security Mechanism) Guidelines 2020.
The government is reforming the ADGSM to address shortcomings. Reforms will commence 1 April 2023.
The government will consult with companies subject to the ADGSM regulations and market advisory bodies (the ACCC and AEMO) on ADGSM reform implementation. This consultation will inform the new ADGSM regulations and guidelines.
Protections for long-term foundational contracts
Australia is committed to retaining its role as a reliable trade and investment partner, especially for energy exports.
This commitment means long-term foundational contracts underpinning investments in Australia’s gas industry will no longer be subject to the ADGSM. To protect these contracts the government will issue export permits if the ADGSM is activated.
Reform consultation activities will help determine the scope of the definition of long-term foundational contracts.
Quarterly consideration of gas supply-demand balance
The global energy market, which interacts with Australia’s domestic gas market, has become more unpredictable.
The Minister for Resources will consider whether a domestic gas shortfall is likely every quarter. This will enable the government to respond to real-word threats to our domestic energy security in a timely manner.
Export permit allocation and trade
The volume of gas needed to resolve a domestic shortfall will be the key consideration in allocating export permits, instead of the exporter’s net market position.
We will issue export permits in a way that ensures each LNG exporter in the shortfall market makes an equal volumetric contribution to resolving the domestic gas shortfall. This will substantially simplify the ADGSM’s operation. It also recognises the shared social responsibility the LNG exporters have to Australia’s domestic energy security.
To improve the ADGSM’s economic efficiency, LNG exporters will be able to trade their export permits.
Agreement with east coast LNG exporters
The government has agreed a Heads of Agreement with east coast LNG gas exporters to safeguard Australia’s domestic supplies.
The Heads of Agreement was negotiated in good-faith between the Minister for Resources and east coast LNG exporters. It is in place until 1 January 2026.
The objective of the agreement is to prevent a gas supply shortfall through access to secure and competitively priced gas for the east coast domestic market. Under the agreement, the East Coast LNG exporters commit to supply sufficient, competitively priced gas to Australian users.
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