Japan's JERA concerned about 'unintended consequences' of Australia's gas reservation scheme

Japan's largest power generation company, JERA Co. Inc., is concerned about the "unintended consequences" of Australia's domestic gas reservation scheme legislation, a company spokesperson told Platts, part of S&P Global Energy, on Oct. 15.

JERA's comments come as the Australian government introduced the national domestic gas reservation legislation on Oct. 14. The new domestic supply obligation is set at 20% of LNG exports and is slated to take effect on Jan. 1, 2028.

"The Australian Government's Domestic Gas Reservation Scheme legislation is a highly complex set of laws, prepared and set to be implemented in an expedited time frame," the JERA spokesperson said.

The spokesperson said JERA respects the decision to introduce a national gas reservation scheme to address gas availability problems on Australia's east coast, adding that the company has direct experience with Western Australia's existing domestic gas reservation policy, which has operated effectively for many years.

"However, like many other long-term customers of and investors in Australian LNG, we remain concerned by unintended consequences of the legislation as it has been drafted," the spokesperson said. "We see constructive parliamentary negotiation on the legislation as now critical to address the consequences and concerns highlighted by the sector."

Minister for Resources Madeleine King said Oct. 14 that extensive consultation and feedback had informed further detailed design work. She added that the bills introduced that morning included further refinements to the scheme based on consultations on the draft bill.

King listed several key changes from the exposure draft, including "limiting Ministerial discretion and making the scheme more transparent; preventing loopholes and making it harder to game the scheme; and making sure that the states and territories are consulted on decisions that impact them, for example, in relation to market-wide domestic supply obligation adjustments."

As Japan's largest buyer of Australian LNG and one of the world's leading LNG buyers, JERA understands "very well the important responsibility of maintaining domestic energy security," the spokesperson said. JERA handled about 40 million metric tons of LNG in fiscal year 2025-26 (April-March), with Australia accounting for roughly 40% of that volume, the spokesperson added.

"The challenge is now constructive parliamentary negotiation to improve the legislation and ensure that it successfully safeguards both domestic gas for Australia and LNG supplies for trusted trade partners well into the future," the spokesperson said.

INPEX's view

Meanwhile, INPEX Corp., operator of the Ichthys LNG project in Australia, is assessing the proposed scheme, according to a senior company official, who highlighted the importance of policy certainty for long-term investment.

"INPEX acknowledges the Australian Government's objective of strengthening energy security and ensuring a reliable long-term gas supply for Australian households and businesses through a domestic gas reservation scheme," INPEX Senior Vice President Corporate Bill Townsend told Platts on Oct. 15. "We are carefully reviewing the Domestic Gas Reservation Bill 2026, the associated levy bill and consequential amendments."

"We will need to fully assess the legislation and understand its practical implications before forming a view on the proposed measures," he added.

Townsend said INPEX believes bringing new gas supply to market is the best way to address potential shortfalls in Australia's east coast gas market and help moderate prices.

"This is particularly important in Victoria and New South Wales, where much of the east coast demand is located. Greater local production would reduce supply constraints, strengthen energy security and support more efficient market outcomes," Townsend said.

"We encourage the Australian Government to progress the actions identified in its Future Gas Strategy to support new gas supply, provide greater investment certainty and enable the timely development of projects needed to meet Australia's future energy needs," he added.

"INPEX believes the most effective way to improve energy security and moderate prices is to encourage investment in new supply through stable and predictable policy settings that support long-term investment and efficient market outcomes," Townsend said.

The Ichthys LNG project involves piping gas from the offshore Ichthys field in the Browse Basin, northwestern Australia, over 890 km (552 miles) to the onshore LNG plant near Darwin.

The project has a nameplate capacity of 9.3 million mt/year of LNG across two trains, with about 70% of LNG output destined for Japanese buyers, according to INPEX.

Australia is Japan's largest LNG supplier, with imports totaling 25.811 million mt in 2025, accounting for 39.7% of its total LNG imports, according to data from the Ministry of Finance.