Australia’s proposed national gas reservation scheme is being developed against a backdrop of rising domestic and international energy costs, declining production in southern states and increasing geopolitical risk, including global LNG disruptions linked to the Iran conflict.
What Australian markets are affected by the new scheme?
The new scheme is national in scope and no exporter is exempt. While the west coast has experienced a domestic reservation of 15% for the past 20 years, the east coast and northern Australia have operated without any equivalent obligation. Therefore, the scheme is more relevant to the east coast market given emerging shortfalls, export projects not located near southern centres and no historical reservation policy.
In Victoria, gas reserves are steadily depleting. AEMO indicated that without new supply, a structural gas shortfall could occur from 2029. How Victoria will access gas reserved under the scheme remains uncertain.
Interestingly, emerging projects such as Beetaloo would be subject to the new 20% domestic supply requirement on any future LNG export production. With Tamboran Resources targeting first Beetaloo gas sales later this year and APA Group progressing pipeline infrastructure to connect the basin to the east coast grid and Darwin, how the scheme interacts with these developments as they progress toward LNG export also remains a live question.
What is the scheme seeking to achieve?
The scheme is intended to reduce gas costs for consumers and may create new opportunities across the gas sector, including in power generation and customer supply. It aims to ensure that a sufficient portion of domestically produced gas is available to support key industries, such as manufacturing, address cost-of-living pressures, and potentially reduce pressure to increase taxes on gas exports.
Following months of consultation with industry, the Government confirmed the initial design of the scheme on 7 May 2026. Under the proposed framework, LNG exporters will be required to supply (rather than merely offer) 20% of their total exports to the domestic market, commencing on 1 July 2027. Export contracts entered into before 22 December 2025 will be honoured, allowing exporters to meet their existing commitments.
The scheme will replace the ADGSM and the voluntary Heads of Agreement and reform the Gas Market Code. The Government has described this as a historic shift in domestic gas market settings, creating a single national domestic supply obligation and offering greater certainty to the local market.
LNG exporters seeking access to the international spot market will need to demonstrate to the Minister that they have actually supplied the domestic market to obtain an export approval.
The design of the scheme will be critical to ensure that:
Further, given that the export contracts entered into before 22 December 2025 are preserved, the impact of the scheme on domestic gas supply in the short to medium term is unclear. The Government has confirmed the scheme applies to the spot market and prospective (uncontracted) gas, meaning its impact will increase as existing long term LNG contracts expire.
All participants in Australia’s gas market are highly interested in the final design of the scheme.