The week in review
While manufacturers may have welcomed the announcement of the national* domestic gas reservation policy announced on Thursday by ministers Bowe, King and Ayers (now there's a name for a legal firm, if ever I heard one), the announcement is scanty on detail.
And even what detail there is has led to confusion and concern in the industry.
So, what do we know?
Well, in the official announcement there were a few definites outlined.
- It'll start on 1 July 2027.
- The reservation quota has been set at 20%.
- Export contracts entered into before 22 December 2025 (remember that date) will be respected.
And then we learned a little more in the press conference given by the ministers.
King: "We will remove the Australian Domestic Gas Security Mechanism; remove the heads of agreement."
Bowen: "This policy applies to is the spot market and uncontracted gas, so i.e. when foundational contracts come off, when the contract has run its course and the company seeks to enter into a new contract, when the reservation policy will apply."
King: "If LNG exporters want to access the quite lucrative, from time to time, international spot market, they will need to demonstrate to me, as Minister, that they have actually and properly supplied the domestic market. And in order for that to happen, to get an export approval, that means they have to go further than simply offering gas, which is the current requirement. They have to actually supply."
So where does this leave the industry? In a fugue of confusion, I would say.
Does the 20% apply annually or over the lifetime of the project? How will projects in WA be affected seeing as there's already a reservation scheme there? Spot sales are already captured under existing rules so why were they highlighted by the ministers? If it's only aimed at uncontracted gas, does that mean the Santos-backed QLNG – often seen as the bête-noire of the issue – will be unaffected as all its gas is contracted? And similarly, could it be that APLNG and QCLNG could be left to shoulder more of the reservation because of their greater exposure to flexible and spot-linked export volumes?
Furthermore, according to reports, the revelations appear to contradict what some in the industry had been told to expect. After months of consultation with Canberra, some producers were anticipating a broader reservation framework tied to overall LNG production rather than a narrower mechanism linked to uncontracted supply.
Now to the more alert followers of the debate, it may have occurred to you that this all seems vaguely familiar. In fact, very familiar.
Thanks to the wonders of modern technology I went back and had a look at what the government had previously announced on the afore-mentioned 22 December 2025.
- The scheme will require exporters to reserve between 15 and 25% of gas production for the domestic market.
- Existing contracts should be respected – both domestic and international contracts.
- The reservation scheme should have capacity to be national* in scope, working in tandem with federal, state and territory gas market mechanisms.
- The reservation scheme is intended to commence in 2027.
So, other than firming up the 20% quota and the precise start date, we learned nothing new yesterday and were left with more questions than we started with.
Spot the difference.
Why did the government decide to come out with an announcement which contained so little of note? Why make an announcement which has only confused and concerned all the vested parties?
The answer really lies in what else happened yesterday – the tabling of the senate's select committee's report into gas taxation.
While the inquiry failed to come to a consensus finding that a 25% gas levy should be implemented, the report's tabling once again brought the issue back into the limelight, something the Labor party would rather not happen.
And so, machinations ensued to try to gazump the committee's report with a bigger, brighter and shinier announcement which might just – if you don't look too closely – look like the government has a handle on the issue.
Politics at its finest.
On the issue of the gas tax, we want to know what you think about the need for reforming the gas sector's taxation regime. Is PRRT doing its job? Should the government implement a new 25% tax? Please click here to take part in our poll - it'll take you less than a minute.
Yours,
Russell Yeo
Editor Energy News Bulletin
*despite mainstream media mis-reporting, it is undeniably a national domestic reservation policy and will potentially impact production on both the east and west coasts.
To get the best analysis and insight of what's happening in APAC's energy sector, sign up for a free trial.
