The competition watchdog has been asked to "shine a light" into the opaque domestic gas market as the Turnbull government searches for ways to reduce price pressure on consumers and ease industry supply constraints.
Following a meeting with the heads of the liquefied natural gas sector in Canberra on Wednesday, Prime Minister Malcolm Turnbull said the Australian Competition and Consumer Commission would establish a monitoring regime to "underpin a new transparency" in the market.
"The government remains concerned that the east coast export LNG operators have not yet clearly articulated how Australian households and business will get adequate supply at reasonable prices," Mr Turnbull said.
"The government has asked the exporters to provide further information, in the context of possible regulatory options, to address the short-term market issues."
Treasurer Scott Morrison said the ACCC will be able to compulsorily acquire information from market players.
"This will increase transparency, facilitate competition and ensure the gas market is operating well for all Australians," he said.
The ACCC will scrutinise the pricing, volume and availability of domestic gas compared to gas being exported.
A recent report into the constrained east coast gas market by the Department of Industry found a lack of transparency in the gas market hindered Australian industry in negotiating supply contracts.
"Given the limited transparency in the eastern Australian gas market, it is increasingly apparent that no single participant has a comprehensive picture of gas reserves and transactions within the market," the department found.
"This lack of market transparency regarding contract information may limit the ability of some participants to negotiate confidently on price, producing disproportionately high transaction costs for smaller volume trades."
The current rising prices and supply shortages is set against a backdrop of Australia rapidly becoming the world's biggest exporter of LNG, overtaking Qatar by 2020, according to forecasts.
The government's reliance on the ACCC to improve the functioning of the market draws a battle line with Labor and the Australian Industry Group, which this week backed "swaps" where LNG exporters would source cheaper gas from Asia to fulfil supply contracts, freeing up more supply for the domestic market.
Mr Turnbull said a framework to ensure gas is delivered at times of peak electricity demand to prevent blackouts will be in place by October, "well in time to prepare for the next summer".
Meanwhile, the Climate Council will unveil a report into the gas industry on Thursday.
It recommends that large investment should not be made in gas as a transitional power source but even greater emphasis should be placed on renewables.
