It's been a tough week for the Albanese government since Treasurer Jim Chalmers released the 2026 Federal Budget. Anthony Albanese is no longer preferred Prime Minister - although we'll see how long that lasts in the fickle fury of the Australian voter - and the government has taken a dive in the polls.
It seems no one is happy. Entrepreneurs, small business owners and start-ups are asking why they should bother. Testamentary trust changes have family trust holders up in arms. Even the The Australian Council of Social Service (ACOSS) and the Council on the Ageing (COTA) have criticised the budget, arguing it fails to adequately support low-income Australians and unfairly impacts older people reliant on private health insurance.
This week, the major gas companies have had their say.
Australia’s largest LNG producers have warned the Albanese government’s proposed east coast gas reservation scheme risks undermining future investment and triggering longer-term supply shortages, despite its aim of lowering domestic gas prices.
The 2026-27 Federal Budget includes AU$35.5 million over four years to strengthen domestic energy security, with the centrepiece being a new Domestic Gas Reservation Mechanism. Scheduled to begin on July 1, 2027, the policy will require the equivalent of 20% of gas exports to be redirected to the domestic market in a bid to alleviate supply pressures.
Policy targets looming gas shortfall
Under the proposed policy, LNG exporters on the east coast would be required to reserve up to 20% of exports for the domestic market from July next year, as the government moves to address looming gas shortfalls and rising energy costs across Victoria, New South Wales and South Australia.
The plan has been driven by concerns that too much gas produced in Queensland is being exported overseas while domestic users face tightening supply and elevated prices.
Speaking at the Australian Energy Producers conference in Adelaide, Santos managing director and CEO Kevin Gallagher said forcing LNG exporters to sell gas into the local market could provide only temporary price relief before discouraging investment in future supply.
“It will kill investment in new supply, and the minute that catches up, you will see shortages ... and you’ll see prices skyrocket,” Gallagher said.
Gallagher compared the proposal to interventions in Argentina, where export taxes and domestic price controls contributed to the collapse of the country’s gas export industry.
“If you want to watch how to kill an industry, go and do a case study of Argentina,” he said.
Government says policy will ease prices
The federal government argues the reservation policy is needed to shield Australians from global gas price shocks and create what Energy Minister Chris Bowen described as a “modest oversupply” capable of easing domestic energy costs.
However, Shell Australia chair Cecile Wake said a requirement to sell, rather than simply offer, gas domestically would fundamentally alter the balance of the market and undermine investment signals for both exporters and local producers.
Woodside Energy CEO Liz Westcott contrasted the proposed east coast framework with Western Australia’s existing 15% reservation policy, which allows producers greater flexibility over when reserved gas is supplied across the life of a project.
“Flooding [the market] in the 2020s is going to be sacrificial to the 2030s as the gas can only be used once,” Westcott said.
Manufacturers back reform
The proposal has attracted support from major manufacturers, which argue cheaper and more reliable gas supply is critical for keeping factories viable and controlling production costs for industries reliant on gas-fired heat and chemical feedstocks.
Further details on the reservation mechanism are expected to emerge during discussions between government and industry representatives.