Frontier Economics has supported decision making in Australia’s energy market for more than 30 years. Over this time we have worked on electricity and gas policies for every State and Federal government in addition to most market participants.
This report summarises the Coalition's suite of gas supply and pricing proposals and provides an independent assessment of the immediate effects (2025/26) on any new gas sales on wholesale and retail prices on final gas customers.
The Coalition’s gas initiatives
Many Australian industries and jobs are dependent on gas for their survival, including industrial, hospitality and commercial enterprises. Similarly, many residential customers enjoy using gas for heating and cooking.
The Coalition has announced a series of initiatives including:
- Introducing ‘use it or lose it’ provisions for offshore tenements to ensure that quality resources can’t be hoarded and denied to the market. The Opposition has committed to working with the states to deliver the same outcome for onshore gas development
- Providing $300 million for the development of the Strategic Basin Plan to help fund resource development
- Providing $1 billion for a Critical Gas Infrastructure Fund to relieve gas supply constraints
- Annual offshore acreage releases to increase the likelihood that new gas resources will be developed
- Making gas a critical mineral, which prioritises development
- Delivering a strengthened ADGSM as a measure of last resort – including obligations to sell into the domestic market, not just offer, if the mechanism is triggered
- Streamlining of red and green tape – including halving timeframes, introducing consistent reporting requirements, reducing the ability of activists to interfere in decision making processes
- Including gas generation in the Capacity Investment Scheme to support the development of gas generation capacity, which will stimulate the development of gas resources to fuel these power stations.
It has also announced the East Coast Gas Reservation Scheme.
This scheme has two key aspects:
- A requirement to supply a proportion of gas supplies to the domestic market
- A scheme that incentivises gas suppliers to offer these gas reserves at competitive prices that ensures stable domestic prices that are not driven by international events.
The proposed East Coast Gas Reservation Scheme will involve an obligation on gas exporters to reserve an additional determined volume of gas for the domestic market.
A key reason domestic gas consumers are paying high prices for gas on the east coast of Australia is because gas producers can earn higher profits by selling the gas all Australians own to international customers. Currently, about 25-30% of gas production on the east coast of Australia is consumed domestically, and the balance is exported, mostly under long-term, foundation LNG contracts.
To note: These proposals do not disrupt the gas reservation scheme that has been operating in Western Australia for almost 20 years.
Impact to wholesale and retail gas prices
The East Coast Gas Reservation Scheme, together with other policies intended to increase the supply of gas and facilitate the transport of gas, would be expected to result in wholesale gas prices that reflect the cost of producing gas. Typically, this would result in wholesale prices of gas in eastern Australia that are lower than they would otherwise be.
It would be expected to result in a 15% reduction in retail gas bills for industrial customers.
Reductions in wholesale gas prices can ultimately be expected to flow through to reductions in retail gas prices. However, there can be a lag in wholesale gas price reductions flowing through to retail gas price reductions as existing contracts are replaced by new contracts.
It is expected to result in a 7% reduction in retail gas bills for residential customers.
Reducing gas commodity prices will also have an impact on electricity prices, since gas-powered generators often determine the wholesale electricity price in the National Electricity Market. We have used our energy market model (Energy42) to determine the impact on wholesale electricity prices of gas commodity price reductions for gas-powered generators, using the reduction in gas commodity prices discussed above. Our modelling suggests that this reduction in gas commodity costs in 2025 and 2026 would result in a reduction in wholesale electricity prices of around 8%.
This would ultimately be expected to lead to a reduction in residential electricity prices of around 3%.
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