By Rob Wheals, CEO Squadron Energy
The Domestic Gas Reservation Bill is moving fast. It passed the House of Representatives on 29 October and is now before a Senate committee. With the scheme due to start on 1 January 2028, there is a short window to fix a gap that could stop it delivering for Australians.
Requiring LNG exporters to supply a share of our gas to Australians, boosting domestic supply and putting downward pressure on prices, is the right objective.
But reserving gas is only useful if that gas can actually reach customers.
Reserved gas still needs a pathway to customers
As drafted, the Bill is clear that Australian gas supplied through the pipeline network can satisfy a producer’s domestic supply obligation. What is less clear is whether the same gas can count when it is liquefied in northern Australia, shipped south, regasified at an Australian terminal and injected into the domestic pipeline network.
That ambiguity matters because NSW and Victoria increasingly need gas from northern Australia as the pipelines carrying that gas south become constrained.
If the law is clear for one delivery route and uncertain for another, the scheme risks tilting investment towards pipelines even where another practical route exists. That could leave reserved gas in Queensland while southern manufacturers and households wait for more pipeline capacity.
The shipping and regas option is not theoretical. Squadron Energy’s Port Kembla Energy Terminal is built, connected to the Eastern Gas Pipeline and ready to supply up to 520 terajoules a day to address winter peaks from 2028.
Further pipeline investment is also coming, with APA targeting Stage 3A of its east coast grid expansion for winter 2028 and the Bulloo Interlink for winter 2029.
The question is not whether Australia should have pipelines or LNG terminals. We need both. The question is whether the legislation should favour one over the other.
This is also not an import policy. Australian gas from Queensland, the Northern Territory or Western Australia can be shipped domestically as LNG, regasified and supplied into the domestic market.
Making that pathway clear matters because the role of gas is changing.
Peak demand changes the economics
Gas is increasingly needed during short winter peaks and to support the electricity system when renewable output is low, rather than being consumed at the same rate all year.
That changes the economics of building more pipelines.
As gas demand becomes more seasonal, pipeline load factors rise. Instead of paying at a load factor of 1, customers face higher effective transport costs because expensive pipeline capacity is used less often.
If new pipeline capacity is built mainly to deal with a few weeks of winter demand, consumers still pay for that infrastructure for the rest of the year.
It creates a kind of infrastructure surcharge: customers pay more per unit of gas because a large asset has been built for capacity only fully needed during peak periods.
The longer the distance, the bigger that effect.
If Australia responds to every winter constraint by building enough pipeline capacity to meet the highest peak, we risk overbuilding the network and locking consumers into decades of costs for capacity that may sit underused for much of the year.
Pipelines will remain the backbone of the east coast gas system. But consumers should not be forced to fund a bigger pipeline system than they need simply because the legislation is unclear about whether another delivery route counts.
LNG terminals provide a different option. Gas can be shipped and stored close to southern demand, and supplied when needed, reducing reliance on long-distance pipeline capacity built around short periods of peak demand.
The problem is not just supply, but delivery
AEMO forecasts that southern regions face peak-day gas shortfall risks from 2029 as southern production declines. It also expects the South West Queensland Pipeline to increasingly reach capacity as NSW and Victoria become more dependent on gas moving south.
That is why annual gas supply numbers can be misleading. Australia can have enough gas over the year and still run short on a cold winter day because the infrastructure cannot move enough gas to where it is needed.
A reservation scheme needs to solve both problems: having enough gas and being able to deliver it.
Two changes to remove the ambiguity
Our proposed amendments would not weaken the reservation obligation, reduce the amount of gas exporters must supply, mandate a regasification terminal, prohibit new pipelines or require more gas production.
They simply ensure Australian gas can reach Australian customers through any practical and commercially viable route.
First, the Bill should put domestic LNG shipping and regasification beyond doubt.
It should confirm that Australian gas transported domestically as LNG can satisfy a producer’s domestic supply obligation once it is regasified and supplied into the relevant domestic market. It should also make clear that LNG shipped domestically and unloaded in Australia is not treated as having been exported merely because part of its journey occurred by sea.
Second, a pipeline constraint should not automatically justify relief from a domestic supply obligation if another commercially reasonable way of delivering the gas exists.
Before infrastructure-constraint relief is granted, the test should consider available LNG shipping and regasification alongside other practical delivery alternatives.
If those alternatives are not commercially reasonable, relief should remain available. But a constrained pipeline should not be treated as though there is no delivery capacity at all.
Let delivery pathways compete
Competition between delivery pathways is good for consumers.
Pipelines should compete with LNG shipping and regasification on timing, reliability and total delivered cost. The market should determine which option makes sense rather than legislation making one pathway legally clearer than another.
Australian consumers should not have to wait years for gas, or pay an infrastructure surcharge for overbuilt pipeline capacity, simply because the law is clearer about one delivery route than another.
The test of a reservation scheme should be simple: does Australian gas reach Australian customers when and where they need it, at the lowest practical delivered cost?