Government sets up fight with Santos over gas reservation plan

Madeleine King says the reservation will put downward pressure on domestic gas prices. (ABC News: Matt Roberts) The federal government has set up a fight with one of Australia's largest oil and gas companies, Santos, over their gas reservation policy. A draft framework released on Monday outlines a plan for a policy that would force exporters to supply the domestic market with 20 per cent of their exports each year. The gas lobby is warning the policy would displace domestic producers, undermine investment and damage Australia's reputation. Link copiedShareShare articleFederal Labor has set up a fight with Australia's second-largest oil and gas company, Santos, after revealing a reservation policy that would hit the company's flagship export venture. In moves likely to be welcomed by users but which have been scorned by exporters, the Albanese government has provided the clearest indication yet of how a domestic gas obligation would work. A draft "framework" released yesterday shows producers will have to supply — not just offer — an amount equivalent to 20 per cent of liquefied natural gas (LNG) exports every year. Any producer wishing to sell LNG overseas would need to meet its obligations in order to maintain export approvals. And to meet those obligations, the government says a producer will be able to use a range of commercial options. Surging levels of renewable energy and better reliability from coal-fired generators are set to give consumers a break, with benchmark power prices to fall up to 10 per cent for consumers and more for small businesses. Among them are reducing exports, importing LNG, helping to bring online extra supply, swapping gas with other producers and paying providers to make the gas available. While the proposed scheme would give producers some flexibility if they were unable to immediately meet their obligations, they would be expected to make up the difference in future years. Companies that failed to comply with the policy could face penalties of up to $100 million or an amount three times the value of any benefit they reaped. Alternatively, they could have their exports restricted. "A minimum liquidity requirement will be included to ensure the Reservation Scheme places downward pressure on prices by ensuring there is always a modest oversupply," the framework notes. Chief executive of lobby group Australian Energy Producers (AEP) Samantha McCulloch warned the draft would "undermine" investment in new gas, "displace" domestic-focused producers and "damage" Australia's standing as a reliable partner of gas in the international market. The industry has been critical of the government's consultation process, but Minister for Resources Madeleine King warned legislation could have moved ahead without corporate input. Energy Australia says the proposed 1.4-gigawatt gas-fired power plant would be critical to the energy transition by supplying reliable back-up power, but analysts have flagged supply and economic issues. "We could have brought in legislation that reflects how we think it should operate, the CEO and others from AEP and gas industry would have objected to that wildly," she said. "What we have chosen to do is have a discussion paper, and an open discussion for consultation, yet they also object to that. "So I really don't know what they hope is the middle ground." Shadow Minister for Resources Susan McDonald said the scheme set out in the proposal would "wipe out" domestic gas producers while also failing to bring prices down for consumers. "This reservation, I am sorry to say, will mean that we have a whole lot of gas piled up in places we just can't use it," she said. "The government is talking about import terminals being an option in Victoria, I mean what a shocking state that we would consider importing gas in to this country, which already has so much gas." Ms King insisted the scheme as laid out in the white paper would drive down costs, but would not say by how much. "We're introducing the policy so that there's a modest oversupply, and in the part of the principle, is to make gas exporters sell into the market, and that's what drives down the prices," she said. The government said the scheme would apply nationally but it noted existing arrangements such as Western Australia's reservation policy would be "recognised". Western Australian gas users are urging the Albanese government to build stronger transparency and enforcement into its proposed national gas reserve scheme. The government also stressed that existing contracts between LNG exporters and their customers "entered on or before 22 December 2025" would be respected. But oil and gas industry analyst Saul Kavonic said the contract productions appeared to be limited. Saul Kavonic, the head of energy research at MST Marquee, said companies faced high hurdles before they could be considered for a lower domestic supply obligation. He said they would have to "exhaust all 'viable' a

Government sets up fight with Santos over gas reservation plan

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Government sets up fight with Santos over gas reservation plan

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