Albanese government announces gas reservation plan to address supply and price

The federal government has announced its much-anticipated gas reservation scheme, to provide security for Australia’s domestic supply and put downward pressure on prices.

The scheme, working though permits, will only affect new contracts. Although it will apply to all new contracts from now, the plan will not begin operating until 2027. Consultations on details will start in the new year.

The government acknowledges the importance of gas in the energy transition, and is seeking to get on top of both availability and cost issues.

“Australian gas for Australian users, ” Energy Minister Chris Bowen said, unveiling the plan with Industry Minister Tim Ayres after a cabinet meeting in Canberra.

The government says one of the principles to guide the detailed design of the scheme is that it “should increase domestic supply, as present contracts expire, to drive downward pressure on price”.

Exporters will have to reserve between 15% and 25% of gas production for the local market. The required proportion will be settled in the consultations.

Bowen said this would amount to 200 to 350 petajoules a year, “which our advice is would be enough not only to cater for the domestic shortfalls that are forecast, but obviously to slightly oversupply the Australian domestic market”.

The scheme will have the capacity to be national in scope, working with gas market mechanisms in states and territories. Western Australia presently has a reservation scheme which operates successfully.

The plan was due to be announced a week ago but that was delayed after the Bondi attack. The government was anxious to get it out before Christmas.

Before the May election the government attacked the Coalition’s plan for a reservation system, which varied in detail from this one.

“The reservation scheme should provide long term certainty for commercial production and investment, including by clearly setting domestic supply requirements well in advance of establishment and minimise impact on Australia’s LNG trade partners and their energy security,” Bowen, Ayres and Resources Minister Madeleine King said in a statement.

Bowen said: “Gas has an important role to play in our energy system as we transition towards 82% renewables. Unlike coal, gas power generators can be turned on and off in a couple of minutes – providing the ultimate backstop in our energy grid”.

Ayres said: “Secure and affordable gas for local manufacturing firms and heavy industry is critical to backing Australian industry and sovereign capability.

"Our government is supporting heavy industry to decarbonise as much as possible – but not every facility can, and some use gas as an irreplaceable feedstock.

"This is one of the reasons we will introduce a domestic gas reservation scheme – and I welcome industry input into its design in 2026,” Ayres said.