Australia Requires 20% of Gas Exports Reserved for Domestic Use

The federal government announced a reservation scheme on Thursday that will force gas companies to set aside the equivalent of 20% of their export volumes for east coast domestic customers beginning 1 July 2027. The policy forms the centerpiece of a broader overhaul of gas market regulations designed to address forecast shortages and exert downward pressure on prices for households and businesses.

It sits in the middle of a previously canvassed 15-25% range and will not apply to contracts signed before 22 December. Under the scheme, the three major Queensland-based gas exporters must prove they have met domestic supply obligations to the federal resources minister before securing permits to sell on the overseas spot market.

This mechanism replaces reliance on the existing "gas trigger" provision, which officials are removing as part of the changes. The start of liquefied natural gas exports from the east coast a decade ago linked the domestic market to international prices.

That connection caused domestic prices to triple and exposed Australian customers to global shocks, including those triggered by Russia's war in Ukraine. Officials stated the legislative requirement would create a modest oversupply of gas on the east coast.

They expect this to avert projected shortages while delivering downward pressure on prices. "Our gas market will no longer be hostage to international markets," one minister said in a statement accompanying the announcement. The changes come as the government continues to resist calls for a 25% tax on gas export revenue.

The prime minister has ruled out any new tax on existing contracts in next week's federal budget, citing concerns about potential backlash from Asian trading partners Australia relies on amid global oil market volatility. A separate parliamentary inquiry examining options for such a tax is scheduled to release its final report on Thursday.

Background to the Policy Shift The east coast gas market has operated under increasing strain since LNG exports began linking it to Asian spot prices roughly ten years ago. What was once a relatively self-contained domestic system became vulnerable to international price spikes, prompting repeated government interventions to secure local supply.

The reservation scheme builds on an earlier commitment announced on 22 December. Industry consultations followed, with the final 20% figure representing a compromise position between the lower and upper bounds discussed with producers. By requiring exporters to demonstrate compliance with domestic obligations before gaining export permits, the policy creates a structural guarantee of local supply rather than relying on discretionary triggers that have proven inconsistent.

The decision stops short of imposing a new tax on gas exports, a measure that has faced mounting pressure but carries diplomatic risks. Asian buyers have become critical suppliers of other fuels to Australia during the current global oil shock, making any perception of resource nationalism potentially costly.

The reservation applies only to future arrangements after the December cutoff date for existing contracts. This preserves commercial certainty for deals already in place while reshaping the market for new volumes. Implementation will require exporters to maintain records and reporting sufficient to satisfy the federal resources minister that the 20% domestic equivalent has been preserved.

Failure to meet this test would block access to international spot sales. The government presented the package as a comprehensive recalibration of the regulatory framework governing the gas sector. It combines the reservation mandate with the elimination of the previous trigger mechanism to create clearer, more predictable rules for both producers and domestic users.

“Our gas market will no longer be hostage to international markets.”

The policy takes effect in just over 14 months, giving producers time to adjust contracting strategies while providing households and businesses earlier certainty about future supply availability.