Australia plans to include existing LNG contracts in its so-called Domestic Gas Reservation scheme, expected to come into force in July 2027, to ensure local supply.
The new Australian regulation, which is still a draft proposal subject to consultation from industry and other stakeholders, requires that local producers set aside 20% of their domestic production for the Australian gas market.
Under the draft Design Framework, the Australian government published on Monday, the Government has been clear that existing contracts, entered into on or before December 22, 2025, will be respected. This is a core announced design principle for the reservation scheme.
Regulated entities will be required to meet their “domestic supply obligation (DSO)” from July 1, 2027. However, they may seek to vary their obligation to account for volumes under existing contracts or existing regulatory arrangements, such as state-based reservation schemes or other arrangements with state and territory governments, the plan says.
The plan puts pressure on Australia’s LNG exporters to boost supply, but major producers and exporters do not expect the new reservation policy to have any impact on their existing contracts.
“The design framework very clearly states that existing contracts will be respected,” a spokesperson for oil and gas giant Santos told Bloomberg.
“Therefore, we anticipate no interference with the performance of our existing contracts,” the spokesperson added.
Under the framework, export approvals for LNG producers will be required from July 1, 2027, after companies prove that they have met their domestic supply obligation.
The new domestic supply obligations in Australia will come at a time when the global LNG supply is set to be much tighter than expected before the Middle East conflict.
The current global LNG crisis, created by the loss of Qatar’s LNG supply due to the closed Strait of Hormuz and Iranian missile attacks on Qatari LNG infrastructure, is projected to tighten global gas markets in 2026 and 2027, and probably out through 2030.
By Tsvetana Paraskova for Oilprice.com
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