Government reaches agreement with Woodside and Esso to boost domestic gas supplies

(Flickr/ Daniele Civello)

Gas companies Woodside and Esso will supply extra gas to the east coast energy market in return for receiving higher prices, the federal government has announced.

The supply deals were made under the government’s Gas Market Code, which began operation last year.

That code set a price cap of $12 per gigajoule, but allowed gas suppliers to go above the cap, subject to ministerial approval, if they promised to prioritise the domestic wholesale market.

The wholesale market is where gas power generators and large businesses purchase gas. Any effect on gas or electricity bills for households would be indirect and is difficult to assess.

Energy Minister Chris Bowen and Resources Minister Madeleine King said the agreements would see over 260 petajoules of gas made available between now and 2033, enough to power all east-coast gas power stations for two and a half years.

“Gas is essential to supporting the nation’s energy grid and the reliable supply of gas is crucial to keeping energy prices down for households and businesses,” Ms King said.

“Gas is our insurance policy for the energy grid as we move to cleaner and greener renewables.”

Last November, the ministers approved separate applications by Senex and APLNG, worth another 304 petajoules. Further applications are being assessed.

The Gas Market Code, which was legislated in late 2022 and enacted in 2023, mandated transparency standards, conduct requirements and a price cap for gas producers.

After negotiating with the industry, the government agreed to add exemptions to the cap. Small producers who solely supply the domestic market were given a blanket exemption, and large producers were able to apply.

The Coalition voted against the code, arguing it was a heavy-handed intervention. The Greens voted for the price cap, but have criticised the exemptions.

James Ha, research lead at Aurora Energy Research, said the exemptions “might help to alleviate supply shortfalls,” but were unlikely to do much for households.

“Two things matter. One is the price the gas is made available at, and if that is well above $12 that is not likely to be helpful for consumer prices,” Mr Ha said.

“The other issue is location. We’ve got quite a limited ability to transport gas from north to south at times when it’s most needed, so extra gas produced in Queensland may have limited effect on gas prices in Victoria and NSW.”