Australia modifies gas reservation rules for LNG exporters

The Australian government has modified its proposed Domestic Gas Reservation Bill 2026, softening previous mandates for liquefied natural gas (LNG) exporters. While the initial proposal sought to force a strict 20 per cent reservation of output for the local market, the revised plan allows exporters to reserve ‘up to’ 20 per cent, with specific volumes to be determined annually by the Australian Energy Regulator (AER).

Energy Minister Chris Bowen stated the policy aims to ensure a modest domestic oversupply to keep gas affordable and shield consumers from global price volatility. The scheme, which is expected to take effect in early 2028, includes provisions for ministerial discretion to reduce obligations if producers face infrastructure constraints or pre-existing contract limitations. This flexibility follows pressure from Asian trading partners, including Japan, South Korea, and Malaysia, who sought assurances that long-term export contracts would be honored.

The policy has faced varying reactions. Industry groups like Australian Energy Producers welcomed the concessions but warned that oversupply could discourage new development. Meanwhile, Western Australia is advocating to remain separate from the federal scheme, citing the success of its own existing 15 per cent reservation model. Major producers, including Santos, Origin Energy, and Shell, will be among those most affected by the new regulations.