Plan will require gas exporters to reserve between 15% and 25% of production for the domestic market
Australia’s federal government has unveiled a potential national domestic gas reservation scheme, whereby gas exporters will reserve between 15% and 25% of gas production for the domestic market.
The proposal is part of its recommendations to counteract alleged “supply shortfalls, surging gas prices and no protections for domestic users”, the government said.
Consultations to develop the scheme have already begun, and the scheme is slated to begin in 2027. The specific percentage to be reserved will be settled after the consultations.
Climate Change & Energy Minister Chris Bowen said: “We acted in the midst of a global energy crisis to address gas shortfalls, ensuring supply and protecting consumers from the worst price spikes – now is the time to seize the opportunity and deliver lasting reform to our gas market.”
“It will operate from 2027, but will apply from today in terms of any new contracts entered into by our gas companies,” he added, highlighting that the scheme will not apply to existing contracts.
The government also indicated its preference for a system where exporters need to meet domestic supply obligations before exports are approved.
In response, the association that represents Australia’s upstream and liquefied natural gas sectors confirmed that gas producers support the introduction of a prospective reservation scheme linked to new supply, but emphasised the design and implementation needed careful consideration.
Australian Energy Producers chief executive Samantha McCulloch said: “As we said from the outset of this review, a well-designed, prospective reservation policy can provide certainty for gas producers and users to invest with confidence.
“However, a reservation policy alone will not fix the east coast gas market. Bringing new supply online sooner, including in the southern states that are facing shortfalls, is the only sustainable way to put downward pressure on prices and keep the market well supplied for the long-term.”
McCulloch emphasised the crucial role of gas in Australia’s energy security and urged the fast-track of new supply through streamlining approvals and encouraging investment in new gas exploration and development.
Gas supply shortages
The Australian Energy Market Operator (AEMO) highlighted in its Western Australia Gas Statement of Opportunities report earlier this month that supply gaps in Western Australia’s domestic gas market are expected to emerge in 2030.
Bowen said the proposed scheme will also work with the existing Western Australian state policy, which provided firsthand reference for the federal government.
Western Australia already has a gas policy in place which requires LNG exporters to reserve the equivalent of 15% of production for the state’s domestic market.
A 2024 update amended the policy to include that onshore gas projects must reserve 80% of gas production for domestic use until 31 December 2030, after which 100% must be reserved for the local market.
In 2022, the Australian government signed a heads of agreement to prevent a gas supply shortfall for the East Coast market.
The Australian East Coast domestic gas supply commitment signed by liquefied natural gas exports to agree on uncontracted gas to first be made available to the domestic market with prices not more than international customers. The agreement was slated to run until 1 January 2026.