Article by Perry Williams, courtesy of The Australian
11.02.2026
The revolt against fresh gas intervention on Australia’s east coast has intensified as pipeline operators and producers fear a taxpayer-funded scheme will lift costs and deter investment.
State and federal energy ministers are weighing whether to hand extraordinary new “last resort” powers to the Australian Energy Market Operator to dodge gas supply shortfalls set to hit southern states from 2028.
Modelling has claimed wholesale gas prices in Victoria could double unless the move to allow intervention in the east coast market proceeds.
However, gas pipeline operators want the proposal axed, saying it would underwrite gas infrastructure with taxpayer money and add to several government market fixes that undermine investment confidence.
“Governments say they want market-led outcomes yet continue to intervene. By allowing uneconomic projects to be publicly funded to address modelled medium-term shortfalls, this proposal would fundamentally distort commercial incentives and investment signals,” Australian Pipelines and Gas Association chief executive Steve Davies said.
The plan to hand Australia’s electricity grid operator strengthened powers has already sparked a stoush with producers amid concern modelling will be used to prioritise LNG import schemes despite fears of a cost hike for users.
Australian Energy Producers, which represents the nation’s major oil and gas suppliers, has said the proposal represented “a significant new intervention in the gas market that risks undermining the objectives of the gas market review, which is focused on moving away from short-term fixes and restoring long-term investment certainty.”
The AEMO powers emerged just weeks after the Albanese government reignited tensions with the three east coast gas exporters by forcing producers to divert up to a quarter of their volumes for domestic needs.
Critics have raised concern the domestic gas reservation scheme was not adequately incorporated into the latest modelling carried out for the mooted AEMO powers. The APGA said shelving the proposed powers would allow existing reforms to operate as intended.
“Gas infrastructure takes years to plan, finance and deliver. When policy settings keep shifting, investors either delay decisions or price in higher risk. In both cases, the costs ultimately flow through to consumers,” Mr Davies said.
Industry figures have also pointed to the heightened powers emboldening a Victorian government-led push to underwrite importing LNG into Australia, which met fierce resistance from South Australia and Queensland last year.
The latest scheme may provide a new entry point given energy ministers in states will be able to determine whether the powers are used depending on immediate gas shortfall needs.
However, the Victorian government has pushed back against speculation it favoured any individual supply source, noting any solution would be determined through a competitive auction, with all relevant technologies considered to deliver gas at the lowest cost to customers.
The Kerry Stokes-backed Beach Energy warned last week the federal government’s proposed east coast gas reservation scheme risks freezing new domestic supply in a repeat of the investment chill triggered by earlier market interventions, unless it is reshaped to prioritise year-round local demand.
The policy is aimed at easing pressure on east coast prices by ensuring more locally produced gas is reserved for Australian users.
Beach cautioned that investors considering projects designed to supply Australian manufacturers and power generators would struggle to compete against exporters able to dump gas into the local market during high-price periods and withdraw when prices softened.
