Gas exporters to be forced to prevent Australian shortfalls under new laws

From January 2028, companies shipping LNG from Australia’s eastern seaboard would have to reserve up to 20 per cent of their annual export volumes for Australian use. The Albanese government is proposing this requirement through its first national gas-reservation scheme. It aims to protect households and businesses from tightening supplies and high prices.

The rule would apply to companies wanting to continue exporting LNG from the east coast. Reserved gas could be sold only in the domestic market. The policy is designed to put about 10 per cent more gas into that market than Australia needs each year, creating greater supply and price pressure.

The biggest effects would fall on Queensland’s three major LNG terminals on Curtis Island. Shell, Origin Energy and Santos operate the relevant ventures. The government says the final changes will close loopholes, while gas producers warn the policy could discourage investment.

A domestic gas-reservation scheme is a rule requiring gas producers that export LNG to keep some production available for customers inside the country. It matters because Australian households and businesses have faced tightening supplies and rising prices while gas exports have expanded. The government wants local users to receive reliable fuel at fairer prices.

Under the proposed system, companies exporting LNG from the eastern seaboard would set aside up to 20 per cent of yearly export volumes. That gas would be for domestic use only. The scheme is designed to put roughly 10 per cent more gas into the local market than it needs each year, increasing supply and easing pressure on prices.

Western Australia already requires LNG exporters to retain 15 per cent of production domestically. The national proposal would extend a similar principle to the east coast from January 2028. Its final rules are intended to prevent companies from exploiting loopholes.

The proposed maximum reservation is 20 per cent of each exporter’s annual LNG export volumes. This is the amount companies could be required to set aside for Australian customers rather than shipping overseas. The figure is significant because Queensland’s export industry was established without the reservation rules already used in Western Australia.

The government says the reserved volumes would deliberately flood the domestic market with about 10 per cent more gas than it needs each year. In simple terms, exporters would redirect part of their planned overseas supply to local users. That extra availability is intended to reduce scarcity and put downward pressure on gas prices.

The actual effect will depend on how much gas companies export and how the final law closes potential loopholes. The policy begins in January 2028. Producers have warned that the rules could stunt investment, while manufacturers argue that cheaper, dependable gas is essential for future plant investment.

The rules would most directly affect companies exporting LNG from Australia’s eastern seaboard. The biggest impact would fall on joint ventures operating Queensland’s three giant LNG terminals on Curtis Island. Shell, Origin Energy and Santos operate those facilities. Queensland’s export industry began without the reservation rules that Western Australia has used for years.

The policy also matters to gas-connected households and businesses across Victoria and New South Wales. Those states rely on supplies that could tighten as ageing Bass Strait fields decline. Gas-intensive manufacturers are another central group. They use gas for kiln and furnace heat, electricity-related processes, or as a raw material.

Manufacturing Australia, representing firms including BlueScope Steel, Brickworks, Dulux Group and Tomago Aluminium, supports the legislation. Chemicals Australia also backs it. Producers and LNG exporters, however, have warned that compulsory reservations could weaken investment incentives and make future projects less attractive.

Reserving gas for local use is intended to increase supply and ease price pressure. The government plans to put about 10 per cent more gas into the domestic market than it needs each year. That extra supply could help households and businesses facing tighter availability, especially as Bass Strait production declines.

For manufacturers, lower-cost gas could protect factories that use it to fire kilns and furnaces, provide process heat, support electricity, or supply chemical production. Industry leaders say gas prices have tripled over the past decade. They warn that without cheaper fuel on longer contracts, more factories could close or move investment offshore.

The policy is not a guaranteed price cut or supply solution. Its intended effect is downward pressure, while producers warn compulsory reservations could stunt investment. Households are already switching from gas appliances to electric alternatives, and residential gas demand has fallen 16 per cent since 2020. Authorities still say new supplies are urgently needed.

Victoria and New South Wales are at risk because they depend on gas supplies while production from ageing Bass Strait oil and gas fields is rapidly declining. Energy authorities warn that, without new supplies, both states could see dangerously low gas stocks by the end of the decade. The risk is especially serious for gas-connected homes and businesses.

Demand is not disappearing quickly enough to remove that threat. Australian households are increasingly replacing gas appliances with electric alternatives, and residential gas demand has fallen 16 per cent since 2020. However, the Australian Energy Market Operator says this shift is too slow to offset the decline in Bass Strait output.

The proposed reservation scheme is intended to make more east-coast gas available locally. It would require exporters to retain some LNG volumes for Australian use from January 2028. That could ease supply pressure, but the article also highlights a continuing tension between reducing fossil-fuel emissions and securing gas for users who still depend on it.

A country can have abundant gas underground yet face domestic shortages when available supply does not reach local users at the right time or price. Supply depends on production, processing capacity and pipelines. Demand comes from homes, electricity generators and manufacturers. If demand remains high while fields decline, the balance can tighten quickly.

Export contracts and LNG infrastructure also shape that balance. Export terminals can direct large volumes overseas, while long-term commitments may limit what producers can redirect locally. The proposed Australian rule would reserve up to 20 per cent of annual export volumes for domestic use. It aims to create about 10 per cent more local gas than demand requires.

Australia’s eastern states face this problem as Bass Strait output declines, even while Queensland exports LNG. Residential demand has fallen 16 per cent since 2020, but AEMO says that change is too slow. The result is a policy debate over prices, investment, exports and reliable domestic supply.