The Australian Government has softened its proposed Domestic Gas Reservation Scheme, shifting from a mandated 20% of liquefied natural gas (LNG) exports for the domestic market to an “up to 20%” figure. The announcement, made on September 10, 2026, introduces the Domestic Gas Reservation Bill 2026, which also delays the commencement of the Domestic Supply Obligation (DSO) until January 1, 2028. This move has significant implications for Australian gas prices and the long-term security of supply for households and businesses.
Previously, the government had indicated a firm 20% reservation, aiming to stabilise domestic gas markets and drive down prices. The revised policy grants the Australian Energy Regulator (AER) the authority to determine the actual volume an exporter must reserve, allowing for flexibility based on market conditions, infrastructure constraints, and existing state-based arrangements such as Western Australia’s 15% reservation scheme.
The Domestic Gas Reservation Bill 2026 is designed to address concerns over gas affordability and supply shortfalls, which have plagued the east coast gas market for nearly a decade. Energy Minister Chris Bowen stated that the policy aims to ensure “gas is more affordable and the domestic market is always modestly oversupplied.”
Delayed Relief for Consumers and Industry
Under the new framework, the licence application process for gas exporters will commence on January 1, 2027, with the Domestic Supply Obligation coming into effect a year later on January 1, 2028. This represents a six-month delay from the initially proposed July 1, 2027, start date, aligning with industry contracting cycles.
The government projects that the scheme could make an additional 200 petajoules (PJ) of gas available annually for the domestic market. This volume is equivalent to approximately 20% of Australia’s total annual domestic demand of around 1,000 PJ and is intended to prevent forecast shortfalls of up to 140 PJ.
“For too long Australia has been in the perverse situation where despite being one of the world’s largest gas producers we had shortages and price shocks at home. We’re fixing that - with a system that secures the gas we need and pushes prices down for households and businesses.” — Minister for Climate Change and Energy Chris Bowen MP
However, the softening of the fixed 20% cap and the delay in implementation mean that any significant downward pressure on gas prices for Australian consumers and industrial users may not be fully realised for some time. Businesses struggling with high energy costs may need to continue exploring other avenues for managing their energy expenditure, such as investing in Best Home Energy Management Systems in Australia 2026: Slash Bills by $1,000+ Annually to optimise their usage across different energy sources.
Industry Response and Ongoing Consultation
The Australian Energy Producers (AEP) industry lobby welcomed the government’s adjustments to the scheme, acknowledging a better calibration with domestic market needs. However, AEP also raised concerns that an oversupply could potentially “destroy investment signals and crowd out smaller, domestic-focused producers.” The organisation criticised the “must sell” requirement, suggesting it could force producers to sell gas below cost or on non-commercial terms, thereby disrupting market dynamics.
The exposure draft of the Domestic Gas Reservation Bill 2026, along with consequential amendments and a levy bill, has been released for public consultation. Submissions are open until September 24, 2026. This feedback period is crucial for refining the legislation before its proposed introduction to parliament later this year.
While the scheme aims to provide a safety net against global gas price volatility and ensure long-term contracting, the immediate impact on household and business gas bills remains subject to the final legislative details and market responses. For households seeking assistance with immediate energy costs, a range of state and federal support measures are available. Understanding these options can be crucial in managing expenses in the interim. Australia’s Energy Bill Relief Landscape in 2026: A Comprehensive Guide to State and Federal Support
The government’s move underscores the ongoing challenge of balancing Australia’s role as a major LNG exporter with the need to ensure affordable and reliable energy for its domestic market amidst a complex global energy landscape.
Gas Price Outlook for 2026-2028
The ACCC’s Gas Inquiry reports have previously highlighted that while the east coast gas market is expected to be well-supplied in Q4 2026, further investment is needed to meet longer-term demand. The softened reservation scheme and delayed implementation of the DSO mean that market forces, alongside the regulator’s discretion, will play a significant role in determining the actual volumes reserved and, consequently, the domestic gas price trajectory leading up to and beyond 2028.