CANBERRA, AAP – The consumer watchdog has warned a supply shortfall in Australia’s east coast gas market is increasingly likely if LNG producers export all of their surplus gas.

Australian Competition and Consumer Commission chair Rod Sims says this precarious supply situation for the next year highlights the importance of the new heads of agreement that the Australian government signed with LNG exporters in January 2021.

Under the agreement, LNG exporters must offer uncontracted gas to the domestic market on internationally competitive terms before it is exported and provide relevant material to the ACCC to demonstrate their compliance.

“The initial material LNG producers provided to us did not adequately demonstrate compliance with the new heads of agreement and they will need to lift their game,” Mr Sims said in a statement on Tuesday.

“The initial responses from LNG producers were concerning given that in the near future Australia’s southern states may depend on their surplus gas. We expect to see better compliance from LNG exporters over the next 12 months.”

The ACCC’s latest gas report shows that prices for contracted gas in the east coast market through to February 2021 remained at the lower levels observed during 2020.

However, it warns tightening supply means these prices may not last.

“Domestic spot prices for gas spiked in July but the increase was driven by a particular set of circumstances that won’t necessarily impact offers for long-term contracts,” Mr Sims said.

“Fortunately, we have subsequently seen some softening of those high spot prices in August.”

However, Mr Sims says while lower prices are welcome, many users are struggling to obtain offers for supply beyond 2022.

“We are also concerned that there have been significantly fewer offers for gas supply being made in the domestic market recently,” he said.

Treasurer Josh Frydenberg said the government will continue to ensure domestic gas users receive the best deals and that prices remain affordable.

“The latest ACCC report, along with more recent gas market activity, demonstrates the importance of the gas-fired recovery to ensure the best outcomes for Australian households and businesses,” Mr Frydenberg said.