Competition policy to date has mostly driven changes at the downstream delivery and retail end of the market.

"The field price represents about 80 percent of the delivered cost of gas to most energy-intensive customers," AGA chairman Ollie Clark said in a statement.

"Enhanced upstream competition is needed to capture the full pricing and market choice benefits of competition in the gas chain. Reducing gas transmission and distribution charges was always merely playing at the margins."

The Australian Bureau of Agricultural and Resource Economics last month forecast gas would achieve a 23.9 percent share of the energy market by 2019/20, revising downward an earlier forecast of a 28 percent share by 2014/15.

AGA executive director Bill Nagle said one of the issues which contributed to the revision was the relative cost of gas and coal-fired generation over the past few years, affecting the penetration of gas in the power market.

"It is entirely possible to get gas prices down by 50 cents to A$1.00 a gigajoule at the wellhead," he told Reuters.

"If gas prices come down we will see quite an interesting battle for market share, but we are not expecting to replace brown and black coal baseload in New South Wales and Victoria."

Electricity generation is dominated by coal-fired power, which is low cost but which emits high levels of greenhouse gasses and which is condemned by environmental groups.

Gas is promoted by the industry as a cleaner fuel which is currently more practical and economic for meeting large scale intermediate and peak load demand than many renewable fuels.

The AGA has called for more active government support to bring new gas basins on line, boosting supply competition.

Potential new supplies include multi-billion dollar projects to bring gas ashore from Papua New Guinea or the Timor Sea.

The AGA also wants policy requiring gas processing plant operators to open access to their plants to other producers, and requiring joint ventures partners to separately market their gas.

Joint marketing arrangements for the Gippsland and Cooper Basin gas ventures expire around the middle of this decade.