The Australian Labor Party has reaffirmed its commitment to continue exporting gas and coal to Asia while advancing new domestic gas reservation legislation aimed at securing local energy supplies. Resources Minister Madeleine King is set to introduce the legislation on Wednesday, which will require liquefied natural gas (LNG) exporters to supply up to 20 percent of their exportable volumes to the domestic market, replacing the existing Australian Domestic Gas Security Mechanism (ADGSM).
The government argues that the new scheme will create a "well supplied" market, rendering the current mechanism unnecessary. Key features of the proposed legislation include limiting ministerial discretion, increasing transparency, closing loopholes, and ensuring consultation with states and territories on decisions that affect them, particularly regarding market-wide domestic supply adjustments.
Central to the policy is Labor’s goal to oversupply the domestic market by compelling exporters to offer gas volumes equal to 110 percent of forecast domestic demand. The government describes this as a “modest” oversupply intended to lower prices for consumers and support local industries. However, energy producers warn that such measures might depress domestic gas prices to levels that could jeopardize the viability of new projects.
Minister King emphasized the essential role of gas in supporting Australia’s manufacturing base, renewable energy rollout, and household heating. She acknowledged the longstanding importance of energy exports to regional stability and economic ties, noting that gas and coal exports help secure energy for countries like Japan, South Korea, Malaysia, and Singapore. King underscored the need to maintain Australian exports as these markets transition toward net zero emissions.
Industry response to the proposed scheme has been cautious. Woodside Energy cautioned that it might cancel a planned Bass Strait gas drilling project if the reservation requirements push domestic prices too low. LNG exporters have also voiced concerns about the obligation to sell, rather than merely offer, gas domestically, suggesting this could encourage buyers to delay purchases in anticipation of falling prices as exporters seek to avoid significant fines—which could approach A$1 billion.
The introduction of the gas reservation legislation follows remarks from Climate Change and Energy Minister Chris Bowen, who highlighted challenges in the renewable energy sector, including the impact of low wholesale energy prices and rising steel costs on wind project development. Bowen noted that while Australia is on track to become the largest market for home batteries globally—surpassing Germany—investment in wind energy is becoming more complex.
Speaking at a business summit, Bowen acknowledged uncertainty around when fuel prices might drop below A$2 per litre, attributing this to ongoing international pressures. He indicated the government would “recalibrate” its approach to wind projects once upcoming state-level announcements are made, recognizing that reduced wholesale energy prices, while beneficial to consumers, complicate investment decisions in large-scale renewable infrastructure.
Overall, the Albanese government appears determined to balance securing domestic energy reliability with supporting regional export commitments and progressing Australia’s clean energy transition, amid mixed reception from industry and ongoing economic challenges.