The Australian government will introduce the Domestic Gas Reservation Scheme bill next week, requiring LNG exporters to reserve up to 20 percent of production for the domestic market, OilPrice reported October 9. The scheme would take effect July 1, 2027 and is aimed at anticipated supply issues on the east coast. The Department of Industry forecasts a gas surplus for early 2027 even before the reservation bites.
The legislation follows the softened exposure draft Energy Minister Chris Bowen released September 10 with Resources Minister Madeleine King. The original framework demanded a hard fixed 20 percent carve-out; the revised version is a flexible ceiling of up to 20 percent, set annually by the energy regulator against a rolling five-year demand forecast plus a 10 percent buffer. Bowen has said the flexible cap could redirect roughly 200 petajoules a year into the domestic market, enough to cover forecast shortfalls of about 140 petajoules, and that existing export contracts would be unaffected. The three east coast LNG projects most affected are operated by Santos, Shell and Origin Energy.
The concessions came after months of lobbying by buyers in Japan, South Korea and Malaysia, whose state-backed energy companies are among the largest customers of Australian LNG, and by domestic producers warning that a hard mandate could force sales below cost and crowd out smaller domestic-focused players. Australian Energy Producers backed the better calibration but kept warning the framework sends concerning signals on contract sanctity.
For LNG markets, the sequencing matters: existing long-term contracts are protected, the ceiling is flexible downward when domestic demand is weak, and the July 2027 start gives one more contract year to adjust. The reservation still permanently changes the east coast supply balance, and any tightening in the 2027 winter demand outlook will now be read against the regulator’s annual setting, which becomes the new price-forming mechanism for Australian domestic gas.