Commodities
Australia Orders LNG Exporters to Reserve 20% of Gas for Local Market, IEEFA Says
Australia will force LNG exporters on the country's east coast to reserve 20% of their supply for domestic users from July 2027, to ease shortages and lower prices, strategists at the Institute for Energy Economics and Financial Analysis said in a note on Friday.IEEFA analysts said the reservation policy is expected to create a modest oversupply of gas in eastern Australia and to put downward pressure on prices that have about tripled since LNG exports from Queensland began in 2015.The policy comes as the Australian Energy Market Operator has warned that eastern Australia could face gas shortages by 2029 as output from legacy offshore fields in the Gippsland Basin declines.The country's Federal Resources Minister Madeleine King said the government would legislate the domestic supply obligation while allowing exporters to honor existing long-term export commitments signed before Dec. 22, 2025.Kevin Morrison, energy finance analyst, Australian Oil and Gas, IEEFA, said Australia is one of the world's largest LNG exporters, shipping about 80% of its gas production mainly to Asian buyers, including Japan, China and South Korea.Morrison said concerns over domestic supply have intensified as manufacturers and chemical producers grapple with high energy costs.The reservation policy will apply to LNG producers operating in Queensland, where three major export plants at Gladstone were developed over the past decade.IEEFA said the rapid expansion of LNG exports from eastern Australia's domestic gas market to international prices is contributing to the closure of some gas-dependent industries, including fertilizer plants.Meanwhile, the consultancy said the policy could also reshape dynamics among LNG exporters.Two Queensland LNG ventures, Origin Energy's Australia Pacific LNG and Shell-operated (SHEL) Queensland Curtis LNG, already supply the domestic market. Santos-led Gladstone LNG has relied heavily on buying gas from third-party producers to meet export commitments.Morrison said the practice reduced gas available to local users and contributed to higher prices and supply concerns.The reservation policy mirrors Western Australia's domestic gas policy, introduced in 2006, which broadly requires LNG exporters to reserve 15% of output for local use. However, IEEFA noted compliance has been weak, with only 8% of gas supplied domestically in 2023.IEEFA said the effectiveness of the new policy would depend on the final legislation and consultation process, noting that loopholes could dilute its impact on domestic supply.Price: $84.53, Change: $+0.29, Percent Change: +0.34%
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