Australia to reserve 20% of export gas for domestic market from July 2027

The Australian federal government will introduce a domestic gas reservation scheme requiring exporters to supply 20% of their volumes to the local market from July 1, 2027, according to a statement on the government website May 7.

"The domestic gas reservation is a great outcome for Australians, as it will put downward pressure on domestic gas prices and ensure Australia will remain a trusted and reliable supplier of LNG to our export partners," Minister for Resources Madeleine King said.

"The reservation also gives industry the certainty it needs to ensure ongoing investment into Australia's gas industry," King added.

Australia is one of the world's largest LNG exporters, and its gas production is also crucial for domestic energy security.

Australia ranked as the world's third-largest LNG exporter in 2025, behind the US and Qatar, supplying about 77.2 million metric tons to global markets, according to S&P Global Energy CERA data, with most exports directed to Asia.

Although Australia has benefited from the development of the LNG export industry through export revenues, royalties, taxation, employment and economic development, local gas markets have faced risks of supply shortages and rising prices, according to the statement.

Secure and affordable gas is a vital pillar of the "Future Made in Australia" agenda, particularly for nationally significant, trade-exposed industrial users that cannot yet adopt electrification, it said.

In addition to shielding industry and households from global price volatility, the move will ensure Australia's energy security by avoiding potential gas supply shortfalls, help build fuel reserves and support more fuels made in Australia being consumed domestically, it added.

Moreover, gas is vital to supporting Australia's 82% renewable energy target. Unlike coal, gas-fired power generators can be switched on and off within minutes, providing the ultimate backstop for the energy grid, the statement said.

The domestic reservation scheme will respect export contracts entered before the government's announcement on Dec. 22, 2025, ensuring exporters can continue to meet their full export commitments, the statement added.

The new Domestic Supply Obligation powers will be jointly administered by the resources minister and the energy and climate change minister, in coordination with the industry and innovation minister.

The government will legislate the new domestic supply obligation and begin further targeted consultation on the final design details, according to the statement.

Industry reaction

The federal government's proposal to require LNG exporters to supply 20% of export volumes into the domestic market raises "significant concerns" about the potential impacts on competition, investment and future gas supply, the Australian Energy Producers industry group said in a separate statement on May 7.

About 20% of export volumes would be equivalent to around 60% of the country's east coast gas market, the industry body, whose member companies account for more than 95% of national production, said.

"Forcing Queensland LNG exporters to supply 20% of export volumes into the east coast market would crowd out smaller domestic producers, reduce competition and impact future supply," Chief Executive Samantha McCulloch said.

Australian gas users remain insulated from the global energy crisis, and there is "no justification for such heavy-handed intervention", she said, adding that the east coast market was currently well supplied, and prices are the lowest they have been in years.

The policy also risks undermining Australia's reputation as a reliable trading partner at a time when the country's LNG exports are critical for regional energy security, she said.

Platts, part of S&P Global Energy, assessed JKM -- the benchmark price reflecting LNG delivered to Northeast Asia -- for June at $17.441/MMBtu on May 6, down 3.8% day over day.