Gas code promises secure supply at 'reasonable' prices

A mandatory industry code of conduct is expected to make gas available for Australian users at “reasonable” prices for the next two years.

But 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.

“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.

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 cost of living pressures.

Announcing the finalised 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, to be reviewed by July 1, 2025.

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.”

Ms King said she expected the largest producers, who are also top exporters, to apply for exemptions and had already had discussions about price and volume for supply commitments.

She said the price cap should reassure consumers of gas - industrial and domestic - and give certainty to producers to invest in new supply.

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,” Ms 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, which will be enforced by the competition watchdog, will be released in coming weeks.