Australia is facing potential trade tensions with key Asian energy partners over its new domestic gas reservation policy. The Albanese government introduced legislation last week that would require the country’s largest liquefied natural gas (LNG) exporters to reserve up to 20% of their annual export volumes for local customers starting in 2028. While existing contracts signed before December 22, 2025, are exempt, the bill explicitly states that any contract renewals or extensions after that date will be subject to the new rules.
The policy aims to lower domestic gas prices for households and industries, addressing long-standing concerns about high local prices despite Australia’s status as a top LNG exporter. However, major Asian buyers, including Japan and South Korea, have expressed strong opposition. Korea Gas Corporation (KOGAS) and Japan’s INPEX have argued that the policy undermines their original investment terms, which include extension options. KOGAS, a significant investor in Australia’s Gladstone LNG terminal, warned that the bill fails to protect the entire duration of their contracts, including extension periods.
Industry leaders have also raised alarms over a “must-sell” obligation that would force LNG producers to deliver prescribed volumes to local buyers, potentially leading to uncommercial deals. Resources Minister Madeleine King defended the policy, stating that any decision to extend an existing contract is a new commercial decision made with full knowledge of the reservation scheme. She emphasized that the government remains committed to honoring existing commercial arrangements.
Local gas-intensive manufacturing firms have welcomed the intervention, arguing that it will help moderate prices that have tripled over the past decade. However, some energy analysts caution that the policy may not deliver immediate benefits, as the Asian LNG contracts underpinning Queensland’s LNG sector are not set to expire until the 2030s. Rick Wilkinson of EnergyQuest noted that Asian buyers, who are also major investors in local infrastructure, feel entitled to exercise their contract extension provisions.