The consultation period for the Domestic Gas Reservation Scheme has ended, and here’s what the industry had to say.
Australian Pipelines and Gas Association
The APGA said in its submission that it supports the government’s objective of improving domestic gas supply but argues the proposed Domestic Gas Reservation Scheme needs significant changes to avoid undermining investment in gas production and infrastructure.
The submission argues the draft framework should prioritise long-term investment certainty. APGA says annual Domestic Supply Obligations (DSOs) and the ability to regularly adjust reservation rates would create uncertainty, discourage long-term contracting and increase market volatility. It recommends setting DSOs over five to 10 years, while retaining annual compliance plans, and keeping reservation rates fixed unless there are clear signs of market over- or under-supply.
APGA opposes the proposal to require up to 30 per cent of reserved gas to be withheld from long-term contracts for sale into short-term markets. It argues long-term bilateral contracts are essential for financing new gas production and pipeline infrastructure, while short-term markets should only be used to manage temporary imbalances.
The association supports allowing producers flexibility in how they meet domestic supply obligations, including through their own production, third-party gas purchases and portfolio optimisation. It also calls for broader regulatory reforms, including a review of cabotage restrictions and the Australian Energy Regulator’s Form of Regulation Review, arguing existing regulatory uncertainty is already constraining investment.
APGA supports recognising renewable gases—including biomethane, hydrogen and synthetic methane—as eligible for compliance, provided they represent additional supply. It recommends technology-neutral eligibility rules and incentives, such as compliance multipliers, to encourage investment in renewable gas projects.
The submission also questions the need for an infrastructure constraint exemption, arguing a well-designed reservation scheme should encourage early investment to address pipeline bottlenecks rather than relying on exemptions. If retained, APGA says the exemption should incentivise investment in new infrastructure and protect companies that expand pipeline capacity.
Overall, APGA argues the reservation scheme should be designed to increase domestic gas supply while maintaining stable market settings that support long-term investment in production and transport infrastructure.
The full submission is available here.
Grattan Institute
In its submission, the think tank backed the government’s objective of ensuring Australians have access to reliable and reasonably priced gas but said several key elements of the draft framework were impractical and based on unrealistic assumptions about how gas markets operate.
Instead of linking domestic supply obligations (DSOs) to LNG production volumes, Grattan recommended obligations be tied to the needs of three separate regional markets — the east coast, Western Australia and the Northern Territory — reflecting Australia’s fragmented gas infrastructure.
The institute also proposed setting supply obligations only slightly above projected domestic shortages, rather than requiring producers to reserve up to 20% of LNG output. It said an oversupply of between 2% and 5% of domestic demand would be sufficient to ease prices while avoiding major distortions to export markets.
Grattan recommended the DSO be established as a rolling five-year obligation, with annual reviews based on the Australian Energy Market Operator’s Gas Statement of Opportunities, providing greater certainty for producers and domestic buyers and encouraging a return to long-term gas contracting.
The submission also rejected provisions allowing exporters to reduce supply obligations if the domestic market was deemed adequately supplied, arguing the mechanism would be difficult to administer and should be removed unless it could be clearly defined.
Among its other recommendations, Grattan called for governments to play a greater role in supporting new gas transport and storage infrastructure, particularly in the Northern Territory, and warned any reservation scheme should be accompanied by stronger emissions reduction policies to ensure it does not undermine Australia’s climate targets.
The full submission is available here.
