Australia’s proposed gas reservation policy could leave loopholes that allow Santos to avoid supplying extra gas to the domestic market, analysts and major energy users warned as parliament debated the legislation on October 27, 2026.

Key Takeaways

  • The proposal would require exporters to set aside the equivalent of up to 20% of production for domestic supply.
  • Critics say project acquisitions, baseline calculations and ministerial discretion could weaken obligations.
  • The legislation was still before parliament; the source did not specify a confirmed effective date.

How the gas reservation policy would work

The Albanese government wants gas exporters to reserve gas for the domestic market each year. The proposal aims to modestly oversupply the east coast market, where prices have risen since three Queensland liquefied natural gas projects began exporting in 2016.

Western Australia would be exempt, while the Northern Territory might be affected. The proposal had not become law, and the available details did not establish an effective date or specify the existing rule it would replace.

Why Santos is at the centre of the debate

Santos leads the Gladstone LNG venture, which has been accused of pushing up domestic prices by buying gas locally for export. Australian Workers Union head Paul Farrow warned that an exporter could potentially meet obligations through acquisitions of local gas projects without adding new supply.

Farrow also said ministers would have broad discretion to vary obligations. MST Financial analyst Saul Kavonic warned that the baselines used to assess projects would be crucial to the scheme’s effectiveness, but that the process for setting them could be opaque and vulnerable to lobbying.

Gas users and producers differ on the draft

Energy Users Association representative Andrew Richards supported the proposal’s intent but warned that ambiguity could undermine it. He said east coast gas prices fell from $13 a gigajoule to about $8.50 after Santos reduced its local gas purchases, which he viewed as evidence of the venture’s influence on prices.

Industry lobby Australian Energy Producers argued that the policy could discourage new projects and ultimately reduce supply. Chief executive Samantha McCulloch objected in particular to a requirement to sell gas, saying it could force producers to accept below-cost or non-commercial terms.

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