Australia Close to Finalizing Gas Reservation Plan for LNG Exporters

The Australian government is set to introduce legislation next week to finalize the Domestic Gas Reservation Scheme, a plan requiring LNG exporters to reserve up to 20% of their total production within Australia. This scheme is expected to come into effect on July 1, 2027, with the east coast of Australia facing potential supply issues by the end of the decade.

The proposed measure has raised concerns among Australia's largest gas producers and exporters, who argue that it could weaken the country's position as a trusted global LNG supplier. Currently, Australia ranks second in LNG exports, trailing only the United States, but it surpassed Qatar earlier this year when Qatar's LNG supply became trapped at the Strait of Hormuz.

Despite this geopolitical development, the Australian government is moving forward with the gas reservation scheme to safeguard domestic energy security and ensure sufficient supplies for the east coast region. The government plans to introduce the relevant legislation in the coming week, according to unnamed sources familiar with the bill's progress.

Importantly, no LNG exporter will be fully exempt from the scheme's requirements, as confirmed by the sources. Recently, Australia has softened its gas supply rules in response to industry lobbying. Initially, producers were obligated to reserve 20% of their output for the domestic market. Now, the proposal is for up to 20% of output to be set aside for the Australian market, with the specific volumes to be determined annually based on a five-year rolling demand forecast.

In a welcome development for the domestic market, government forecasts indicate that Australia will have ample gas supply to meet demand during the January to March 2027 quarter. The Department of Industry, Science and Resources stated that "forecasts show a healthy surplus across the east coast market."