Gas producers have expressed strong concerns about the Albanese government’s proposed gas reservation scheme, warning that it could stall domestic contracting and investment decisions in Australia’s gas market. The policy, which cabinet is scheduled to consider on Monday ahead of its final release next week, would require exporters to offer gas volumes exceeding forecast domestic demand by as much as 110 percent, a measure the industry says risks creating market imbalances.

At the heart of industry apprehension is the plan’s asymmetrical design: while exporters would have to supply more gas than anticipated domestic consumption, buyers would face no mandatory purchase obligations. Producers argue this could result in large quantities of unsold gas accumulating, potentially year on year, stretching export compliance and investment plans.

A senior industry source shared an illustrative scenario anticipating the market might be asked to absorb about 500 petajoules of gas, despite actual demand hovering around 400 petajoules—estimates rather than official forecasts. This surplus risk stems from the government’s intention to maintain a buffer above domestic demand, ensuring reliable supply for households and businesses. However, producers caution the approach may overshoot actual market needs, creating uncertainty.

Compounding concerns is the possibility that unsold gas volumes could be carried forward to subsequent years, inevitably increasing future supply obligations. This dynamic might encourage large industrial customers to defer contracting in expectation that a growing surplus would drive prices down, undermining government aims to foster longer-term agreements that provide market stability.

Producers also highlighted challenges in securing five-year supply contracts, partly due to transportation costs. Queensland gas transported to southern markets faces pipeline charges that can undercut the economic attractiveness of longer-term deals for southern industrial customers, raising questions about the commercial viability of increased domestic supply.

Investment uncertainty is another key issue. Developing or expanding gas projects requires substantial upfront capital and long lead times, forcing producers to evaluate returns against global opportunities and other energy sectors. The inability to predict future domestic sales obligations accurately—as well as the conditions under which exemptions might be granted—may discourage capital commitments.

The proposed legislation empowers ministers with discretionary powers to adjust supply obligations within set limits and grant exemptions impacting individual exporters. While this flexibility could prevent companies from inadvertently breaching their obligations in a scenario of oversupply, the industry fears reliance on ministerial discretion adds a layer of unpredictability that could further complicate investment and contracting decisions.

Despite detailed feedback submitted during consultations, industry representatives say the government has shown reluctance to introduce mechanisms robust enough to balance mandatory supply obligations with genuine demand conditions. Producers warn that without such balance, the scheme may stall investment and market activity, undermining Australia’s position as a leading gas exporter.