The federal government will extend the life of the so-called gas trigger until January 2030 as it seeks to shore up supply for the domestic market.
Following the regulations being put in place to extend the Australian Domestic Gas Security Mechanism (ADGSM) , Resources Minister Madeleine King will issue a notice of intent to use the trigger in 2023.
"These measures announced today will safeguard Australia's energy supplies," she told reporters in Canberra on Monday.
"They are designed to work hand in glove with work being done by the energy ministers."
Ms King said after the notice of intention is released, gas producers will have the opportunity to provide information on gas production, plant export volumes and the market outlook.
"This is their opportunity to demonstrate that there won't be a domestic shortfall next year," she said.
There will be a further review of the mechanism, which was due to expire in January 2023, in 2025.
The government has also opened consultation on reform to the trigger "to ensure that it is an effective tool and fit for purpose", the minister said.
"The government wants to make sure that the ADGSM is improved, is fit for purpose and can be activated at short notice to help with the potential shortfall," she said.
As well, the government will start negotiations on a new heads of agreement with major gas producers.
The heads of agreement is a deal that ensures uncontracted gas is offered to Australian users in the first instance to help avoid a forecast shortfall.
The decisions came as a major report into Australia's gas supplies predicted a significant shortfall next year as spiking energy prices heap cost-of-living pressure on household budgets.
But the industry says gas supply will be adequate next year.
Treasurer Jim Chalmers says the latest gas inquiry report from the competition watchdog highlights some "alarming" features of the east coast gas market.
"It projects a significant gas shortfall for next year unless gas producers supply more of their uncontracted or excess gas to the domestic market," he said.
The Australian Competition and Consumer Commission (ACCC) report, released on Monday, said the shortfall would occur in 2023 if all the excess gas produced by exporters was sent overseas.
It foreshadows the shortage will occur amid rising demand and an increase in uncontracted gas, which will likely be sold offshore at higher prices.
The report said the shortfall would be worse than the situation in 2017, when both the ACCC and the Australian Energy Market Operator predicted shortages the following year.
That resulted in the then-coalition government triggering the gas security mechanism process and ultimately striking a deal with gas exporters to make excess gas available in Australia before it was sold overseas.
The Australian Petroleum Production and Exploration Association (APPEA) said the ACCC report showed 167 petajoules of uncontracted gas was available for supply into the domestic market next year.
"This is more than enough gas to ensure that no shortfall occurs," APPEA acting chief executive Damian Dwyer said.
"There has never been an actual shortfall and there will not be one next year - this is the ACCC signalling that action is needed, and the industry will act."
Opposition treasury spokesman Angus Taylor said more supply was needed in the domestic network to prevent a crisis.
He said the threat of pulling the gas trigger had worked for the coalition when they were in power.
"The government needs a plan where it's working with the gas producers, with the threat they will take stronger action if necessary," he told Sky News.
