The Australian federal government has proposed a national domestic gas reservation scheme, requiring gas exporters to reserve between 15% and 25% of their production for the domestic market. This initiative aims to address supply shortfalls, surging prices, and a lack of protections for domestic users. Consultations to develop the scheme are underway, with implementation slated for 2027; the specific reservation percentage will be finalized after these consultations. The policy will apply to new contracts entered into from the announcement date but will not affect existing contracts.

Government Rationale and Proposed Mechanism

The government's proposal stems from a need to ensure supply and protect consumers from price spikes, as stated by the Climate Change & Energy Minister. A key preference indicated is for a system where exporters must meet domestic supply obligations before receiving approval for exports. The government also notes that the proposed federal scheme will work alongside an existing state reservation policy in Western Australia, which served as a reference point.

Industry Response and Concerns

The industry association representing upstream and LNG sectors expressed conditional support for a prospective reservation scheme linked to new supply, emphasizing that its design and implementation require careful consideration. The chief executive of Australian Energy Producers argued that while a well-designed policy can provide investment certainty, it alone will not fix the east coast gas market. The industry stresses that bringing new supply online sooner—particularly in southern states facing shortfalls—through streamlined approvals and investment encouragement is the only sustainable long-term solution for price pressure and supply security.

Existing Policies and Market Context

The proposal aligns with and builds upon existing gas reservation frameworks. Western Australia already has a policy requiring LNG exporters to reserve 15% of production for the domestic market. A 2024 update further mandates that onshore gas projects reserve 80% of production for domestic use until the end of 2030, shifting to 100% thereafter. Separately, for the East Coast, a 2022 government agreement with LNG exporters commits them to offer uncontracted gas to the domestic market first at prices no higher than those for international customers; this agreement is set to expire at the start of 2026. The need for such measures is underscored by market forecasts, including a recent operator report highlighting anticipated supply gaps in Western Australia's domestic market by 2030.