The east coast gas cartel

The east coast gas market was not always this concentrated. It became concentrated through a series of mergers and acquisitions that the ACCC approved, or failed to block, over more than a decade.

The critical acquisitions were Shell’s takeover of Arrow Energy in 2010 — giving Shell access to vast coal seam gas reserves in Queensland — and Shell’s acquisition of BG Group in 2015. After those two transactions, Shell alone controlled approximately 43 per cent of east coast coal seam gas reserves. The three Queensland LNG export projects — APLNG (Origin/ConocoPhillips), GLNG (Santos), and QGC/QCLNG (Shell) — and their associated joint venture partners together had effective control over close to 90 per cent of east coast reserves.

The ACCC has allowed what was once our gas market to become a cartel, controlled by just four players. We have high gas prices in Australia because the ACCC has given up on its principal remit — ensuring market competition.Bruce Robertson, IEEFA

The ACCC’s own inquiry reports describe the structural features Robertson identifies, without using the word ‘cartel’: concentrated ownership, limited competition, LNG exporters as ‘swing producers’ with discretion over whether uncontracted gas goes to export or domestic market, prices set by international benchmarks rather than domestic cost of production.

The key structural feature of the east coast gas market that produces the domestic pricing crisis is what the ACCC calls ‘swing gas.’

Queensland’s three LNG export projects have long-term contracts to supply specific volumes of LNG to Asian buyers. But those projects also have gas production that is not committed to any contract — ‘uncontracted gas.’ The LNG exporters have a choice with this uncontracted gas: export it to the spot market (where Asian prices are high) or sell it into the domestic market (where it would ease prices for Australian households and manufacturers).

The ACCC’s June 2025 report stated the position clearly: ‘The LNG exporters are the only producers with discretion to either export their uncontracted gas, or supply it into the domestic market.’ And it found that the risk of domestic shortfall in 2026 depended entirely on whether ‘Queensland LNG producers export all their uncontracted gas.’

When it is more profitable to export — which it usually is — the gas leaves Australia. When the domestic market is tight, the ACCC issues warnings. The exporters may or may not respond. The domestic market has no legal claim on the gas.

Meanwhile, the LNG exporters collectively shifted from being net contributors of gas into the domestic market to net withdrawers in 2023. The ACCC expected this withdrawal to increase in subsequent years.

Western Australia has a domestic gas reservation policy. Enacted in 2006, it requires LNG export projects to reserve approximately 15 per cent of their production for the domestic WA market. The result: WA domestic gas prices have historically been significantly lower than east coast prices. WA manufacturing has not experienced the same price-driven closures.

As Article 1 of this series documented, the WA reservation policy was imposed despite fierce opposition from the industry and from federal Resources Ministers of both parties. Ian Macfarlane condemned the policy at international oil and gas conferences. Martin Ferguson, Labor’s Resources Minister, opposed it. WA Premier Barnett implemented it anyway. It worked.

The east coast has no equivalent. When Queensland’s LNG export terminals were approved and built from 2015, no domestic reservation was imposed. The east coast was effectively opened to export without protecting the domestic market.

High east coast gas prices are not an abstraction. They have produced a documented wave of manufacturing closures and industrial contractions.

Incitec Pivot — a major producer of explosives and fertilisers — closed its Gibson Island fertiliser plant in Brisbane in 2022, citing the high cost of domestic gas. The plant had operated for more than 50 years. Incitec had previously flagged that domestic gas prices made Australian production uncompetitive against imports.

The Australian Strategic Policy Institute described the situation as ‘a sovereignty issue, not a market quirk’ — arguing that Australia’s fragmented domestic gas infrastructure and export dominance leave Australian manufacturers structurally vulnerable to manipulation by a handful of export-focused companies that face no domestic supply obligation.

This transmission mechanism means that the concentration in the gas export market flows directly into household power bills, small business energy costs, and the economic viability of energy-intensive Australian industries.

The ACCC has conducted its Gas Inquiry since 2017. In that time it has produced dozens of reports, identified the structural problems in the market with increasing clarity, and issued repeated warnings about domestic supply risks.

But the ACCC’s powers in the gas market are primarily transparency and monitoring powers. It can report on prices, identify shortfalls, and recommend policy responses. It cannot compel LNG exporters to supply domestic customers. It cannot set domestic gas prices. It cannot reverse the mergers and acquisitions that created the current concentrated market structure.

The Government has intervening powers — the Australian Domestic Gas Security Mechanism (ADGSM), enacted in 2017, allows the government to restrict gas exports if a domestic shortfall is declared. But the ADGSM has rarely been triggered and is designed as a last resort, not a market-structuring tool.

The result: the ACCC documents the problem with increasing precision, reports the problem with increasing urgency, and the structural conditions that create the problem remain in place.

The east coast gas market has a continuous ACCC inquiry, years of documented findings, and structural shortfalls projected from 2028. The same companies whose dominance of reserves was documented in the inquiry’s earliest reports are still the only entities with discretion over whether domestic customers receive adequate supply. The regulator monitors. The industry decides. Australians pay.

The domestic pricing crisis is directly connected to everything else this series has documented. It is not a separate problem from the PRRT failure or the donation system or the revolving door. It is the same problem expressed in the daily energy costs of Australian households and businesses.

The gas was extracted from Australian territory. The resource belongs to Australians. The companies extracting it paid almost no resource tax. They exported 80 per cent of the gas to Asian buyers. They became the swing producers for the domestic market and routinely chose the more profitable export option. The domestic market tightened. Prices tripled. Manufacturers closed. Households paid higher electricity bills.

And through all of it, the ACCC runs its inquiry. And the PRRT collects less than beer excise.