Prime Minister Malcolm Turnbull will confront some of the nation's biggest gas companies on Wednesday and ask the energy giants to supply gas locally to ease household cost pressures and avoid future blackouts.
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State government bans on developing new conventional and unconventional, or coal seam gas are also in the Prime Minister's sights, as the political war escalates over how to ensure stable supply and drive down power prices.
Mr Turnbull and senior ministers Josh Frydenberg, Arthur Sinodinos and Matt Canavan will attend the crunch meeting with gas companies including Santos, Origin, ExxonMobil and Shell.
It comes a day after South Australian Premier Jay Weatherill announced a new, "go it alone" energy package worth $550 million to tackle head-on the series of blackouts that have hit the state.
The package includes $150 million for 100 megawatts of battery storage for renewable energy, the largest in Australia; $360 million for a new gas power plant and, crucially, new laws to give the state the power to override the Australian Energy Market Operator and require more power to be sent to the state when needed.
The Turnbull government will seek agreement from major gas producers to supply more gas in times of peak demand - rather than exporting it offshore to Asian markets - to put downward pressure on prices and ensure the east coast does not experience the blackouts South Australia has suffered.
The Prime Minister will also urge new exploration of gas by the gas companies, which depends, in part, on state governments unlocking development rules.
Ahead of the meeting, Mr Turnbull said: "Australians need to be assured of reliable and affordable energy. Government and industry recognise the need to work for secure and competitive energy markets that bring forward gas supplies and help to lower emissions.
"Households rely on gas supplies to provide an affordable means to heat their homes.
"Unfortunately, state and territory government bans are putting at risk thousands of jobs by stopping the development of our gas reserves even by conventional means. The only sustainable way to guarantee affordable gas reserves is through the responsible development of our gas."
Federal Energy Minister Frydenberg immediately warned the SA plan could undermine the national electricity market, force up prices in South Australia as well as Victoria and NSW, and announced the federal government was seeking legal advice on the new powers.
But Mr Weatherill said his state "has stepped up into the breach in the absence of national leadership".
Labor and the union movement have called for a gas reservation policy to ensure some gas is reserved for the Australian market and while the federal government has appeared to flirt with the idea, cabinet sources said such a policy is not expected to be unveiled.
Mr Frydenberg declined to rule out such a move on Tuesday but, in the first instance, pointed out that Australia was exporting two-thirds of production offshore and vowed a "frank conversation" at the meeting with gas companies about the needs of the domestic market.
"We are seeing situations in Victoria and, indeed, SA where gas which was meant for the domestic market has now been exported to Queensland and off to Asia," he said.
"We are seeking advice on whether the decision today by South Australia to go it alone is in breach of the national electricity market rules, which has kept the system together for the last 20 years."
Mr Weatherill fired back that Mr Frydenberg should look at the detail of his state's plans to go it alone and shore up the state's supplies before seeking legal advice.
There were suggestions late on Tuesday evening from within the federal government that the plan to preference South Australian gas for the state could breach section 92 of the constitution, which governs trade within the Commonwealth.
Labor leader Bill Shorten said the opposition had been calling for a national-interest test to reserve gas for domestic users if needed.
"We must look at all viable options to secure our domestic gas supply, and we need real leadership, otherwise tens of thousands of Australian jobs will go," he said ahead of the meeting.
The Australian Industry Group chief executive Innes Willox said the South Australian government's intervention was "understandable", given recent events but "we do not want a result where market governance is confused and the national character of our market is lost".
