The Australian Government has introduced new legislation to mandate a domestic gas reservation scheme, requiring gas exporters to set aside 20 per cent of their total production for the Australian market from 1 July 2027. This significant policy shift, with details announced on 7-8 May 2026 and legislation tabled on 11 May 2026, aims to put downward pressure on soaring gas prices for Australian households and industries, while also safeguarding against potential supply shortfalls.
The move comes amid sustained concerns about the impact of liquefied natural gas (LNG) exports on domestic supply and pricing, particularly on the east coast. For over a decade, the growth of the LNG export sector has linked Australia’s east coast gas market to volatile international prices, contributing to a significant increase in domestic gas costs.
Under the new scheme, which will be enshrined in legislation, gas exporters will be compelled to supply a proportion of their total production – specifically 20 per cent of their LNG exports – to Australian users. This measure is designed to create a modest oversupply of gas in the eastern Australian market, which is expected to translate into lower prices for consumers.
“The Australian Government is introducing a domestic gas reservation scheme. This scheme will commence on 1 July, 2027. It will require gas exporters to supply a proportion of their total production to the Australian market. This is equivalent to 20 per cent of liquified natural gas (LNG) exports.”
Crucially, the policy will respect export contracts entered into before 22 December 2025, ensuring that existing commitments can be met by exporters. This phased implementation aims to provide certainty for the industry while progressively strengthening domestic supply.
Addressing Price Volatility and Supply Security
The primary objectives of the domestic gas reservation scheme are twofold: to put strong downward pressure on domestic gas prices and to shield Australian domestic users, including industry and households, from global price volatility. This is particularly vital for nationally significant, trade-exposed industrial users who currently lack viable electrification alternatives.
The policy also seeks to avoid potential gas supply shortfalls, a concern that has grown as traditional sources, such as the Gippsland Basin off the coast of Victoria, are projected to decline from 2030.
Queensland, for instance, has seen its gas prices triple from 2014-15 to 2025-26 (year-to-date), becoming the highest in eastern Australia due to the influence of LNG exports. This has directly impacted energy costs for both businesses and residential users in the state. The new federal policy aims to mitigate such pressures across the east coast. For those concerned about rising energy expenses, understanding the components of your bill and available options remains crucial. Decipher Your 2026 Australian Electricity Bill: Tariffs, Charges & Save $200
Lessons from Western Australia
Western Australia has operated a gas reservation policy since 2006, requiring LNG exporters to set aside 15 per cent of their gas for the domestic market. While compliance has reportedly been a challenge, the existence of such a policy provides a precedent for the federal government’s new approach. The federal scheme’s higher 20 per cent reservation rate reflects a more assertive stance to address the east coast’s unique market dynamics.
Broader Energy Transition Context
The government’s commitment to securing gas supply also aligns with its broader “Future Made in Australia” agenda, recognising gas’s ongoing role as a transition fuel while the country accelerates its shift towards renewable energy. The decline in gas-fired generation in the National Electricity Market (NEM) and the increasing output from wind and battery generation have contributed to lower wholesale electricity costs in recent months, demonstrating the broader impact of renewable integration.
However, for many Australian homes, managing energy bills, particularly as winter approaches and previous federal rebates concluded at the end of 2025, requires proactive strategies. How to Cut Your Electricity Bill This Winter in Australia 2026: Strategies After Federal Rebates End
What This Means for Consumers
While the full impact of the gas reservation scheme will not be felt until its implementation in July 2027, the government’s decisive action signals a commitment to rebalance the domestic gas market. The expectation is that this will lead to more stable and potentially lower gas prices in the long term, offering a degree of relief to consumers and businesses grappling with energy costs.
For now, households and small businesses in New South Wales, South East Queensland, and South Australia are also awaiting the Australian Energy Regulator’s (AER) final determination for the Default Market Offer (DMO) 2026-27, expected by 26 May 2026. The AER’s draft determination, released in March 2026, proposed average electricity price reductions for these regions, driven by falling wholesale electricity costs and reduced retail operating costs.
Projected Annual Bill Changes (Draft DMO 2026-27 for Residential Flat Tariff Customers - Illustrative)
| State/Region | Distributor | Proposed Change (AUD) | Proposed Change (%) |
|---|---|---|---|
| New South Wales | Ausgrid | -$90 | -4.6% |
| Endeavour Energy | -$64 | -2.7% | |
| Essential Energy | -$226 | -8.2% | |
| South East Queensland | Energex | -$216 | -10.1% |
| South Australia | SA Power Networks | -$31 | -1.3% |
Source: AER Draft DMO 2026-27, typical annual usage of 4,000 kWh without controlled load.
These electricity price adjustments, coupled with the new gas reservation scheme, indicate a complex but potentially more favourable energy landscape for Australian consumers in the coming years. Businesses, too, stand to benefit from more predictable and competitive gas and electricity prices, supporting economic stability and growth.