Mandatory Domestic Gas Reservation Scheme: What You Need To Know

On 7 May 2026, the Federal Government announced a mandatory domestic gas reservation scheme, to be legislated through Parliament. 

Background

• The announcement follows a review of the East Coast gas market. The Gas Market Review Report (Report) was released by the Australian Government on 22 December 2025. 
• The Report determined that existing Commonwealth frameworks (the Gas Market Code, the Australian Domestic Gas Security Mechanism (ADGSM), and the Heads of Agreement (HoA)) were inadequate to meet the Government’s current objectives.
• A central recommendation of the Report was the introduction of a domestic gas reservation scheme.
• The Government’s 7 May 2026 announcement brings that recommendation into formal policy, with details to follow.
• In the Government’s 2026-27 Budget, $30.6 million was allocated over four years to support the development and implementation of the scheme. A further $4.9 million has been allocated in 2026-27 to modernise offshore resources regulation.

Core obligation

The scheme requires LNG exporters to supply 20 per cent of their total LNG export production into the domestic market. This is framed as an aggregate obligation across LNG production rather than a per-exporter threshold.

The scheme is intended to commence on 1 July 2027, with final consultation on legislation to occur throughout June and July 2026, giving industry approximately 13 months from the announcement to prepare for implementation.

Enforcement mechanism  

The obligation is enforced through an export approval regime. 

LNG exporters wishing to sell LNG under new LNG contracts or in the international LNG spot market must first demonstrate to the Commonwealth Resources Minister that they have completed the required natural gas sales to the domestic market. The existing HoA requirement, which required certain exporters to “offer” gas but did not require the sale of gas, will be removed.  

Scope

The scheme applies to new LNG contracts entered into after 22 December 2025 and the LNG spot market. 

Although the scheme will not disturb any contracts already in place prior to 22 December 2025, the obligation will apply when existing LNG contracts expire and producers seek to enter into new LNG supply arrangements.

Regulatory simplification

As part of this structural reform, the Government intends to streamline existing gas market regulation by removing the ADGSM, removing the existing HoA with various LNG producers on the East Coast, and reforming the Gas Market Code in an “appropriate way”. The legislative changes seeking to achieve these objectives have not yet been released.

Next steps

Detailed consultation with industry continued the day following the announcement. Key matters still to be resolved include:

• the precise implementation and administration mechanics, including how compliance with the domestic supply obligation will be measured (whether on a prospective or retrospective basis), and the nature and frequency of information provision and reporting obligations to the Government;
• how the existing WA reservation framework will interact with the federal scheme;
• any current or future application of the scheme to the Northern Territory;
• whether LNG exporters that have satisfied their domestic supply obligation may also purchase natural gas from the domestic market for the purpose of LNG export;
• how “new contracts” will be defined for the purposes of the scheme, including whether amendments, extensions, or variations to existing LNG contracts will be treated as new contracts triggering the reservation obligation;
• provisions to account for existing delivery and infrastructure constraints; and
• the impacts and approach to producers that only supply natural gas domestically, who are not LNG exporters but supply a significant proportion of gas to domestically.

Legislation to give effect to the scheme is to be introduced to Parliament, for further review and monitoring of its impacts.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.