By Keira Wright | Updated on Oct 09, 2026 at 05:07 AM
Australia is set to unveil the final version of a controversial plan to force liquefied natural gas producers to reserve as much as a fifth of their output for local buyers.
The government will introduce legislation underpinning the Domestic Gas Reservation Scheme next week, according to three people directly involved with the proposal, who asked not to be named because the discussions are private.
Australia – now the world’s second-biggest LNG exporter after Qatari supply was choked off due to the Middle East war – exports about three-quarters of its gas, but is facing a domestic shortfall on its more populated east coast toward the end of the decade. The plan has faced vocal opposition from producers, who say it could stymie investment and damage the nation’s reputation as a reliable supplier to global markets.
LNG producers must set aside 20% of their gas output for the local market, according to a draft of the scheme released in May. However, following industry lobbying the government softened its position, saying in September companies would be required to keep as much as a fifth of their production in Australia, with the exact amount to be set annually based on a rolling five-year demand forecast.
No individual exporter is expected to receive a full exemption from the rules, two of the people said.
The Department of Climate Change, Energy, the Environment and Water did not immediately respond to a request for comment.
With projects in Western Australia already subject to a 15% state reservation policy, the new rules will have the biggest impact on three major developments in Queensland — Australia Pacific LNG, Gladstone LNG and QCLNG. The projects have shareholders including Shell Plc, ConocoPhillips, Santos Ltd. and Origin Energy Ltd.
The scheme threatens to have a particularly big influence on the Santos-operated Gladstone project, which has historically struggled to produce enough gas to meet export commitments.
Read More: Santos CEO Says Australia Needs Gas Rules That Boost Investment
The policy is likely to be bullish for global LNG prices, which are already at elevated levels due to the loss of most Qatari supply that’s trapped behind the contested Strait of Hormuz, although there are questions about how much extra gas Australia’s domestic market can absorb. Most of the country’s LNG exports go to China, Japan and South Korea.
The plan may also crimp government finances, given LNG is one of Australia’s biggest export earners , along with iron ore, gold and coal.
The license application process for the scheme will start from Jan. 1, 2027, and the domestic supply obligation will begin a year later, the government said in September.