The Albanese Government has introduced landmark legislation into Parliament this week, establishing Australia’s first national Domestic Gas Reservation Scheme. The new policy, set to commence in January 2028, mandates that liquefied natural gas (LNG) exporters reserve 20% of their production for the domestic market, aiming to put downward pressure on gas prices for Australian households and industry.
The legislation, introduced on October 13, 2026, seeks to replace a fragmented system of Commonwealth interventions with an integrated, rules-based framework. This move comes amidst ongoing concerns about gas supply security and affordability, despite Australia being one of the world’s largest LNG exporters.
Why the Change? Securing Supply for Australians
For years, Australian households and businesses have faced volatile gas prices and supply uncertainties, even as significant volumes of gas were exported. The new Domestic Gas Reservation Scheme is designed to address this imbalance, ensuring that Australia’s abundant gas resources deliver value at home.
Minister for Climate Change and Energy, Chris Bowen, emphasised the intent behind the reforms.
“Australians deserve access to affordable gas. That’s exactly what this reform delivers,” Minister Bowen stated. “For too long Australians have watched our gas leave our shores while local households and businesses faced uncertainty and rising costs and despite being one of the world’s largest gas producers we still suffered shortages and price shocks at home.”
The scheme’s primary objective is to create a “modest oversupply” in the domestic market, which is expected to drive down gas prices. This is crucial for sectors like manufacturing and heavy industry, which rely heavily on gas, as well as for households managing their energy budgets. For more on managing household energy costs, see our guide on Navigating Australia’s Energy Bill Relief and Support in 2026: A Comprehensive Guide.
Key Provisions of the New Legislation
The National Domestic Gas Reservation Scheme introduces a new domestic supply obligation for LNG exporters. This obligation is set at 20% of LNG exports, calibrated against forecast domestic demand. The Australian Energy Regulator (AER) will be empowered to ensure gas companies meet a target of 110% of projected demand each year.
This new framework will replace the previous Turnbull-era domestic gas security mechanism and other ad-hoc interventions, limiting ministerial discretion and aiming for greater market certainty.
| Feature | New National Domestic Gas Reservation Scheme (from Jan 2028) | Previous Interventions (e.g., DGSM) |
|---|---|---|
| Framework | Integrated, rules-based | Multiple, ad-hoc interventions, Ministerial discretion |
| Obligation | 20% of LNG exports reserved for domestic use | Triggered by forecast shortfalls |
| Enforcement | Australian Energy Regulator to ensure 110% of projected demand | Less clear, ministerial powers |
| Goal | Downward pressure on prices, secure supply | Address shortfalls, security |
Industry Concerns and Future Outlook
While the government anticipates a positive impact on prices and supply, the peak industry body, Australian Energy Producers (AEP), has raised concerns. AEP warned that certain provisions in the legislation could compromise future investment in gas exploration and production. Samantha McCulloch, Chief Executive of Australian Energy Producers, cited government analysis suggesting the policy could lift regulatory costs by AUD 75 million and reduce future investment.
“The government cannot expect industry to invest billions of dollars in new gas supply while introducing policies that fundamentally undermine the commercial viability of those investments,” Ms McCulloch stated.
Minister for Resources, Madeleine King, acknowledged industry’s reliance on gas for the “foreseeable future” and maintained that the scheme is designed to push down prices without crashing the market. She also noted that the scheme respects existing contracts and aims to preserve certainty for overseas trading partners.
The legislation is currently before Parliament, with further debate and potential amendments expected. Its implementation from January 2028 will be a critical step in reshaping Australia’s domestic gas market and its role in the broader energy transition. As Australia moves towards a cleaner energy future, understanding options to reduce reliance on gas, such as through home electrification, is becoming increasingly important. For guidance on this, consider our article on Electrify Your Home in 2026: Real Costs, Rebates & Savings Up to $15,000+.
The government’s commitment is that these reforms will lock in more gas for Australians, strengthen energy security, and support the transition to a renewable energy grid, ultimately helping to put downward pressure on prices.