Proposed Domestic Gas Reservation Scheme: key takeaways

What we know: the Australian Government announced it will introduce a domestic gas reservation scheme requiring gas exporters to supply the equivalent of 20% of their total exports to the Australian domestic market, although relief has been flagged for existing export contracts. This obligation will commence on 1 July 2027.

What has been announced?

The new Domestic Supply Obligation will apply to gas exporters operating in the east coast Australian gas market. Exporters will be required to make available a volume equivalent to 20% of their exports for supply into the domestic market from 1 July 2027.

Will this affect existing export contracts?

The Government has previously confirmed that export contracts entered into before 22 December 2025 will be "respected." It is not entirely clear whether this means that LNG exporters will be exempt from reserving 20% of the volumes supplied under those contracts for the domestic market, although the Minister for Climate Change and Energy, Chris Bowen, has stated that the policy will apply to the spot market and uncontracted gas, so when foundational contracts come off, the reservation policy will apply.

What should gas market participants do now?

The Government has stated that the scheme is intended to provide certainty for both gas producers and domestic gas users, facilitating long-term domestic supply contracts. Participants should consider the implications of the new obligation for existing and prospective offtake arrangements, project economics, and domestic marketing strategies.

What happens next?

Further targeted consultation on final design details expected to follow. Key parameters including the precise compliance mechanism, reporting requirements, and any penalties regime are expected to be addressed through that consultation process.

Affected parties should monitor developments closely as the legislative framework and detailed design are progressed.