The Albanese Labor Government has announced a significant shift in Australia’s gas policy, introducing a domestic gas reservation scheme that will require liquefied natural gas (LNG) exporters to set aside 20% of their production for the Australian market. Announced on May 7, 2026, this policy is slated to commence from July 1, 2027, aiming to exert downward pressure on domestic gas prices and insulate consumers and industry from global market volatility.
This landmark decision comes amidst ongoing concerns about energy affordability and supply security, particularly on the east coast. The scheme mandates that three Queensland-based LNG exporters – Origin Energy, Shell, and Santos – will be required to meet this domestic supply obligation.
Minister for Climate Change and Energy Chris Bowen stated the policy will ensure a “modest oversupply” of gas in the domestic market, which is intended to drive down prices and disconnect Australian gas from international price spikes. Minister for Resources Madeleine King added that the reservation would provide the industry with the certainty needed for ongoing investment.
“We’ve been acting to shield Australians from global energy shocks by investing in reliable, sovereign renewables and keeping more of the gas we need onshore,” Minister Bowen said. “Our sensible, practical policies mean we will avoid gas shortfalls and will be able to protect consumers from global energy price spikes.”
The Mechanics of the New Scheme
The core of the new policy is a 20% reservation of LNG export volumes for domestic use. This obligation will apply to new export contracts entered into after December 22, 2025. Critically, existing long-term contracts signed before this date will be “grandfathered,” meaning they are exempt from the new requirements.
From July 2027, LNG exporters will need to obtain an ‘export approval’ from the Minister for Resources to access the international spot market. This approval will be contingent on them demonstrating that they have met their domestic supply obligations. The government has indicated that further detailed industry consultation will commence immediately to finalise the scheme’s design.
Impact on Prices and Supply
The government anticipates that this reservation will place “strong downward pressure” on domestic gas prices and help avoid potential gas supply shortfalls, which have been a recurring concern for the east coast market. The Australian Competition and Consumer Commission’s (ACCC) Gas Inquiry March 2026 interim report had previously forecast that east coast demand (499 petajoules) would exceed supply (488 petajoules) during Q3 2026, potentially resulting in a shortfall of 12 petajoules.
While the government is confident in the policy’s ability to lower prices, specific figures for household savings have not yet been provided. Industry Minister Tim Ayres noted that while they are not making predictions about specific price levels, the scheme aims to provide the “lowest possible price for Australian households and Australian industry.”
For context, gas prices in Western Australia, which has had a domestic gas reservation policy for over a decade, typically range between AUD $6.50 and AUD $8.50 per gigajoule. In contrast, east coast prices have recently doubled, sitting between AUD $13 and AUD $15 per gigajoule.
This intervention is a significant step beyond previous measures, such as the Australian Domestic Gas Security Mechanism (ADGSM), which allowed the government to restrict exports as a measure of last resort. The new scheme creates a more permanent structural shift in the market.
Industry Reaction and Future Outlook
The gas industry has expressed some criticism, citing a lack of detail and concerns that the policy could deter future investment. However, the government has committed to close collaboration with the sector during the consultation phase to refine the scheme’s implementation.
For households and businesses grappling with energy costs, particularly as winter approaches, this policy offers a long-term prospect of more stable and potentially lower gas prices. While the federal energy bill relief fund concluded at the end of 2025, state-specific rebates and concessions continue to offer some support. Households looking to manage their energy consumption effectively, especially with rising costs, may also consider strategies outlined in guides such as Australia’s 2026 Winter Gas Squeeze: How to Prepare Your Home and Avoid Bill Shock and How to Cut Your Electricity Bill This Winter in Australia 2026: Strategies After Federal Rebates End.
The success of the reservation scheme in achieving its stated price reduction goals will largely depend on the final design details and the industry’s response to the new regulatory environment. As Australia continues its energy transition, policies that balance export revenue with domestic energy security and affordability remain critical.
Gas Market Price Comparison (Example, Q1 2026)
| Region | Average Spot Price (AUD/MWh) | Change Year-on-Year |
|---|---|---|
| NEM-wide | $73 | -12% |
| Victoria | $43 | -28% |
| Queensland | (Meaningful reduction) | |
| New South Wales | (Meaningful reduction) | |
| South Australia | $88 | +33% |
Note: This table reflects wholesale electricity spot prices from AEMO’s Q1 2026 report, not retail gas prices, but illustrates general market dynamics influenced by supply and demand. Specific east coast retail gas price impacts from the reservation scheme are yet to be quantified.