Australia plans to reserve 20% of gas for domestic market
Australia’s federal government plans to introduce a national gas reservation scheme by mid-2027. It provides that exporters may be required to direct to the domestic market a volume equivalent to 20% of their annual production. As ABC News Australia reports, the initiative aims to increase gas supply for Australian consumers and businesses amid high domestic prices.
Australia’s Resources Minister Madeleine King said that existing contracts with foreign buyers would remain untouched: producers would not be required to breach agreements already concluded. She also did not specify whether the new requirements would apply equally to all liquefied natural gas exporters.
Assessments of GLNG
Saul Kavonic, head of energy research at MST Financial, believes that one of the key problems of Australia’s eastern gas market is the Gladstone LNG (GLNG) project, operated by Santos. In his assessment, the project has enough gas mainly to fulfil long-term export contracts and had to buy gas on the domestic market to cover its own obligations.
Kavonic calculated that Santos and its GLNG partners have bought back volumes equivalent to 20% of gas supplies in eastern Australia since 2016, which otherwise could have been available to local consumers. In his view, the future reservation scheme will have a chance of being effective only if it is applied to all three export LNG projects in Queensland.
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Santos response
Santos rejected criticism over GLNG’s impact on the domestic market. A company spokesperson said that neither GLNG nor Queensland’s LNG industry as a whole had caused gas shortages or spikes in domestic prices. She linked the problems to restrictions on gas exploration in the states of New South Wales and Victoria.
The company also said it covered 62% of the seasonal gas shortfall on the east coast during winter periods in 2023–2026. Santos said that from 2026 it does not plan to enter into new contracts to purchase gas on the domestic market to cover a potential LNG shortfall.
Former Woodside chief Peter Coleman noted that the depletion of old fields in the Bass Strait and decisions by some states to restrict gas exploration had also affected the situation. At the same time, he believes that excessive investment in export capacity may have increased companies’ costs and prices for domestic consumers.
