After months of speculation, the Federal Government has officially confirmed the details of a domestic gas reservation scheme.
The scheme will require exporters to reserve between 15 and 25 per cent of gas production market, with the required proportion to be settled after the forthcoming consultation.
Design of the domestic gas reservation scheme will be driven by key principles as set out in the Gas Market Review, with the ultimate design goal being to secure the supply needed for the energy transition, and to put downwards pressure on prices for domestic gas users.
Principles that will guide detailed design include:
- Existing contracts should be respected – both domestic and international contracts. Any contracts in place before today’s announcement will be considered existing contracts. Any contracts signed after today’s announcement will not be considered existing 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.
- The reservation scheme should increase domestic supply as existing contracts expire, to drive downward pressure on price.
- Under the preferred export approval model, exporters will need to meet domestic supply obligations first.
- Producers should have flexibility to meet domestic and export obligations through a variety of standard commercial/market-based arrangements, including contracting with exporters or domestic producers so long as supply obligations are met.
- The reservation scheme should encourage long term domestic gas supply contracts to support investment decisions which rely on gas as an input, including C&I users and supporting gas infrastructure providers.
- The reservation scheme should provide long term certainty for commercial production and investment, including by clearly setting domestic supply requirements well in advance of establishment and minimise impact on Australia’s LNG trade partners and their energy security.