Australia Unveils Domestic Gas Reservation Scheme to Boost Supply and Affordability

The Australian government has released exposure drafts for the Domestic Gas Reservation Scheme (DGRS), aiming to ensure reliable domestic gas supply and affordable prices. The scheme proposes to require exporters to hold a licence and supply up to 20% of their total exports to the Australian market.

Exporters will need to apply for a licence from January 1, 2027, with the Minister considering factors such as the applicant's export intentions, capability, and physical connection to an Australian gas supply network. The licence term will be between 20 to 50 years, providing regulatory certainty for long-term investments.

The Domestic Supply Obligation (DSO) requires exporters to deliver a minimum amount of natural gas to the domestic market each year. The default DSO figure is 20% of total covered exports, but the Minister and Australian Energy Regulator can vary this percentage annually. Exporters can also reduce their DSO by adjusting quantities arising from existing supply contracts, reservation requirements, or infrastructure constraints.

Industry leaders have expressed concerns about the potential impact on investment and future supply. Santos CEO Kevin Gallagher warned that the scheme could 'kill investment in new supply' if not designed carefully.