In a landmark move to tackle soaring energy costs, the Australian government has announced a new policy forcing the country's major liquefied natural gas (LNG) exporters to set aside a significant portion of their production for domestic use. Climate Change and Energy Minister Chris Bowen unveiled the long-awaited scheme, describing it as a "historic" step to ensure Australian gas prioritises Australian consumers.
A New Mandate for Domestic Supply
The core of the policy is an export permit scheme that will require the three major LNG companies operating on Australia's east coast in Queensland to reserve between 15% and 25% of their gas for the domestic market. This substantial allocation is equivalent to 200 to 350 petajoules of gas annually. Minister Bowen emphasised that while the formal scheme will commence in 2027, its conditions must be factored into all new contracts signed by the gas companies from this point forward.
"Australia gas for Australian users, that’s the first priority," Bowen stated in Canberra. He explained the policy is designed to engineer a slight oversupply for domestic needs, applying "maximum downward pressure on prices." This intervention addresses a critical paradox: despite being the world's third-largest LNG exporter, Australia's eastern states have faced warnings of potential gas shortfalls and skyrocketing costs for households and industry.
Addressing the Energy Price Crisis
The policy is a direct response to mounting pressure from heavy industry and consumers. With vast quantities of gas being sold into more lucrative international markets, domestic users have struggled with steep price hikes. For example, Victorian household gas costs have nearly doubled over the past decade, a period that coincides with the ramp-up of the nation's LNG export industry. The Australian Energy Regulator has warned that states like New South Wales and Victoria could face supply gaps as soon as the winter of 2028.
Josh Runciman, lead gas analyst for Australia at the Institute for Energy Economics and Financial Analysis, endorsed the government's chosen model. He called the export licence approach "clearly the best option," noting it provides certainty and is straightforward to implement. "By targeting the LNG exporters, who have most of the reserves anyway, the government is getting bang for buck without complicating the market more than it needs to," Runciman said.
Implications and Expected Outcomes
While the full effect on consumer bills will not be felt until the scheme's 2027 start date, the announcement is expected to influence the market immediately. Runciman suggested that large industrial users negotiating new, multi-year contracts should now be able to secure better terms based on the future promise of increased domestic supply. "The moment that additional gas comes into the market, we’d expect to see that price impact fairly quickly – and that would flow through to lower electricity prices," he added.
The government will now enter a consultation phase to finalise the details with industry stakeholders over the coming months. This "historic" reservation policy marks a significant shift in Australia's energy governance, aiming to rebalance the interests of a lucrative export industry with the fundamental energy security and affordability needs of its own citizens and businesses.
