Is Australia’s gas reservation scheme really aimed at Santos?

Australia aims to ensure domestic gas supply remains affordable and accessible through its Domestic Gas Reservation Scheme. This legislation requires LNG exporters to supply gas to domestic customers, addressing concerns over potential supply shortages and rising costs. Introduced to parliament on October 14, the scheme's scope has sparked debate, particularly over whether it unfairly benefits specific companies like energy giant Santos.

While the government includes exemptions for existing gas contracts, critics question if this favors companies, such as Santos' Gladstone LNG project, over others. Santos, an Australian oil and gas company, operates significant projects including the Barossa LNG and Beetaloo Basin gas fields, with its Gladstone LNG plant relying on domestic gas to meet export commitments, including deals with South Korea and Malaysia.

The proposed laws could impose a heavier commercial burden on Santos due to its reliance on domestic gas. Santos Managing Director and CEO Kevin Gallagher endorsed the government's efforts to honor existing contracts and support gas investment but stressed the need for clear and transparent rules. The scheme's success hinges on its ability to compel meaningful contributions to domestic supply, rather than mere compliance.

Critics warn that exemptions could allow companies like Santos to continue exporting gas without meeting domestic supply obligations, particularly through contract extensions such as the one covering KOGAS, a major South Korean LNG customer, which includes a potential five-year extension. The scheme must clarify whether extensions qualify for protection and under what conditions, ensuring all exporters fairly contribute to domestic supply.