The federal government is offering funding support to onshore gas projects to boost domestic supply as long as state governments agree to withdraw bans on drilling.
The coalition has outlined a budget plan to allocate $28.7 million for a new east coast gas development program that it says will help target faster development of onshore gas fields.
"This new program will support projects that provide gas to domestic users and activities that accelerate gas supply from significant resources," resources minister Matthew Canavan said on Tuesday.
"Funding will be subject to removal of regulatory restrictions, like moratoria on onshore conventional gas developments."
Currently, Victoria has in place a blanket ban on all exploration activity, while the Northern Territory government also imposed a moratorium on fresh drilling.
New South Wales has shied away from approvals for coal seam gas projects under pressure from environment groups.
Major gas companies have slammed the state government curbs on drilling, blaming them in part for the severe shortage in local supplies.
The focus on domestic supplies comes weeks after Prime Minister Malcolm Turnbull announced the Australian Domestic Gas Security mechanism, under which the government can impose export controls on LNG companies when there is a shortfall of local supplies.
Analysts have blamed the shortage in part on the three Queensland-based export- focused liquefied natural gas projects that have squeezed supply and pushed up prices.
Under the budget proposals, the government has also provided $30.4 million over three years for a bioregional assessments program to examine waterway and acquifer impacts of developing new unconventional gas reserves.
Another $19.6 million will go to the Gas Market Reform group over four years, to target better gas trading, greater competition to lower prices, while it has outlined $5.2 million for a cost-benefit analysis to explore gas pipeline construction from NT and WA to the east coast.
The government is also looking to tighten regulatory oversight for the energy sector and will provide $6.6 million over three years to competition watchdog ACCC to set up gas markets monitoring regime, and another $7.9 million to review retail electricity prices.
It will also provide an additional $7.95 million to the Australian Energy Regulator to ensure energy providers are serving consumer needs.
