The Australian federal government has confirmed the implementation of a mandatory gas reservation mechanism for the domestic market. This system will require producers operating on the east coast to reserve between 15% and 25% of extracted gas for local use, aiming to secure national supply and exert downward pressure on wholesale prices.
A mechanism immediately applicable to new contracts
Although the mechanism will come into effect in 2027, any new contractual agreement signed from today will be subject to the upcoming regulation. Minister for Climate Change and Energy Chris Bowen specified that a consultation process would begin with industry stakeholders to finalise the programme’s framework, based on an export permit system conditional upon first meeting domestic supply needs.
The announcement comes as the Australian Competition and Consumer Commission anticipates a supply shortfall from 2028 on the east coast, despite reserves deemed sufficient to meet a decade of demand. Earlier this year, the government launched a six-month market review to address rising tensions between domestic industrial demand and international export commitments.
Ongoing concerns about real impact on prices
Currently, east coast gas prices have tripled, reaching AUD12 to AUD14 per gigajoule (approximately $8.10 to $9.45), severely affecting energy-intensive industries. The minister did not specify how far prices might drop under the proposed scheme, only noting the aim to create a slight oversupply on the domestic market to counterbalance price increases.
The opposition described the measure as “too little, too late” and argued it fails to address immediate shortfall risks. Party spokespeople criticised the lack of concrete commitments to unlock new sources of supply.
New supply needed to offset Bass Strait decline
Chris Bowen acknowledged that declining production in the Bass Strait would require new developments to ensure national energy security. He stated that his counterparts from Malaysia, Singapore, Taiwan, Japan and South Korea — key buyers of Australian gas — had been informed of the policy framework.
The industry, represented by the Australian Energy Producers association, expressed openness to a reservation mechanism, while urging stronger incentives to accelerate new production, especially in southern states facing structural deficits.
Expected impact on heavy industry
Industry Minister Tim Ayres said the measure aims to ensure energy stability for workers in gas-reliant industrial sectors, particularly processing plants. According to him, regulatory certainty provided by the mechanism is a key element of national economic resilience.
Australian Workers Union National Secretary Paul Farrow welcomed the decision while calling for concrete guarantees to ensure gas availability from the programme’s first day. He stated that the gas market will only stabilise when the pricing issue is fully resolved.
