Gas reservation scheme: what large gas users need to know

Labor is reportedly preparing to scale back its domestic gas reservation scheme, including the target to supply 110% of forecast domestic demand, to win Coalition support. For large gas users, the final design will shape contract timing, price expectations and supply confidence, so now is a good time to review your gas procurement plans.

The Senate Economics Legislation Committee is due to report on the Domestic Gas Reservation Bill 2026 on 11 November 2026. Labor has not yet detailed any amendments. Here is what we know so far, what could change and what it could mean for your business.

What is the domestic gas reservation scheme?

The scheme requires LNG exporters to supply part of their gas to the Australian market as a condition of exporting. The government announced it in May 2026, originally as a fixed reservation of 20% of exports.

The design was revised in September. Under the exposure draft, the Australian Energy Regulator (AER) would set each exporter's obligation every year so that total supply meets 110% of forecast domestic demand, capped at 20% of exports. The government estimated this could add up to 200 petajoules (PJ) of gas a year, against forecast shortfalls of up to 140 PJ (ABC News).

Under the September design:

• Exporters would need a licence to export, with licence applications opening on 1 January 2027
• The domestic supply obligation would take effect from 1 January 2028
• Exporters would have to actually supply their domestic allocation, not just offer it for sale
• The Minister could reduce the obligation in a market that is already well supplied
• Existing export contracts would be respected (Minister for Resources)

The bills were referred to the Senate Economics Legislation Committee on 15 October 2026 (Parliament of Australia).

What could change, and why?

The main sticking point is the 110% target. Producers argue that, combined with penalties for falling short, it would effectively force them to sell gas rather than simply make it available.

Australian Energy Producers, the industry's peak body, has said the target would weaken investment signals and crowd out smaller producers focused on the domestic market. The industry warns this could undermine the case for new gas developments just as east coast supply tightens.

Labor is now expected to scale back the target and has signalled it is open to concessions to win Coalition support (The Australian). The Coalition has said it wants more gas for Australians, more investment, existing contracts honoured and lower prices driven by supply rather than price controls.

This would not be the first change. The fixed 20% became a ceiling in September, and in October the government narrowed the Minister's powers over how much gas an exporter can be required to reserve (AAP). Critics, including the Greens and the Australian Industry Group, argue the changes already give exporters too much room to avoid their domestic supply obligations.

What could it mean for business gas buyers?

For manufacturers, hospitals, property portfolios and other large gas users, the final design will shape three things: when to go to market, what prices to expect and how much supply confidence to build into budgets.

Under the current design, the supply obligation would not take effect until 1 January 2028, and the rules could change again before then. Contracts you sign in the meantime will be priced in today's market.

Some buyers may be tempted to hold off contracting until the rules settle, in the hope of lower prices. Waiting is a strategy in itself, and it carries its own price and supply risk if the market tightens before the scheme takes effect.

What can large gas users do now?

1. Check when your current gas contracts expire and which sites they cover.
2. Map your volume needs, and the flexibility you need, over the next two to three years.
3. Set your procurement window early, so a contract expiry doesn't force a rushed decision.
4. Follow the Senate committee's findings and any amendments, and test your strategy against both outcomes.

How can Eutility help?

Our energy procurement team runs structured, competitive gas and electricity tenders through SmartProcure. This covers market timing advice, tender management, negotiation and contract execution. Retailer pricing is typically valid for only 2 to 7 days, so having your data and approvals ready before you go to market matters.

For larger gas users, our progressive purchasing service, SmartTrading, spreads price risk across a longer period rather than fixing all volumes at a single point in time. It typically suits users consuming more than 300 TJ of gas a year.

If your gas contract expires in the next 12 to 24 months, talk to our team about your timing and options. Call 1800 676 098 or email customerservice@eutility.com.au.

Sources

• The Australian, An off-ramp: Labor expected to dilute its contentious domestic gas supply rules, November 2026, subscription required (accessed November 2026).
• ABC News, Labor backs away from fixed 20pc gas reservation but denies watering down plan, 10 September 2026 (accessed November 2026).
• Minister for Resources, Securing more affordable gas for Australians, September 2026 (accessed November 2026).
• Australian Associated Press, Gas reserve scheme to be scaled back before it begins, 14 October 2026 (accessed November 2026).
• The Energy, Minister dials down gas supply powers, 14 October 2026 (accessed November 2026).
• Parliament of Australia, Domestic Gas Reservation Bill 2026 and related bills, Senate Economics Legislation Committee inquiry (accessed November 2026).