Australia's federal government will introduce a bill next week that forces LNG exporters to hold up to 20% of their total production inside the country, with the new rules taking effect on July 1, 2027.

The measure, formally the Domestic Gas Reservation Scheme, targets a supply squeeze that forecasters expect on Australia's east coast by the end of the decade. Rather than a production mandate, the scheme functions as a volume reservation: exporters on the Curtis Island complex in Queensland and other producing regions would need to divert a defined share of output — up to one-fifth of total production — into the domestic market rather than loading it as LNG cargo.

The government has not yet published the final drafting details of how the 20% figure will be calculated, whether it applies to contracted or uncontracted volumes, or how the obligation interacts with existing long-term LNG sale agreements with buyers in Japan, South Korea and China. Next week's bill is expected to settle those parameters.

What does the scheme change for east coast supply?

The policy's rationale is timing. Australia's east coast gas market — served largely by fields feeding the Gladstone LNG plants and by conventional and coal-seam-gas production in Queensland and Victoria — faces an expected shortfall at the end of the decade as legacy fields decline.

The reservation mechanism gives the government a structural lever: if the domestic market tightens, exporters would already be obligated to keep up to 20% of production onshore. That converts what has historically been a voluntary offer-and-incentive approach into a compulsory requirement embedded in law from July 1, 2027.

For east coast industrial users, power generators and gas retailers, the scheme is designed to provide a floor under domestic availability before the forecast crunch arrives. For producers, it caps the share of output they can freely export.

How have the major LNG exporters responded?

The scheme has drawn pushback from Australia's biggest gas producers and exporters. Their core argument: a compulsory 20% set-aside could undermine Australia's standing as a reliable LNG supplier to global markets.

That is a reputational claim, but it carries commercial weight. Australia ranks among the world's top LNG exporters, and buyers writing 15- and 20-year supply contracts price counterparty and country risk into their negotiations. Producers contend that a mandated domestic reservation introduces a competing claim on molecules that could make Australian cargoes look less dependable than competing supply from the US Gulf Coast or Qatar.

The producers' concern, as reported, centers on the signal the scheme sends to long-term customers — not on an immediate volume loss, since the obligation does not begin until mid-2027.

What is sanctioned versus what is still open?

Two things are settled. First, the government will table the bill next week. Second, the scheme's start date is fixed at July 1, 2027, with the reservation level set at up to 20% of total production.

What remains open:

• The final drafting of the bill, including how the reservation percentage is applied and measured
• Any flexibility mechanisms, exemptions or compensation arrangements the government may include
• The parliamentary path of the legislation and potential amendments during debate
• How producers allocate volumes between existing export contracts and the new domestic obligation once the scheme takes force

The watch item

The immediate item to watch is next week's bill. Its drafting will show whether the government has softened the 20% obligation with carve-outs for contracted cargoes, or whether the requirement stands as a hard cap on exportable volumes from July 1, 2027.

The second watch item is the market response. Producer warnings about reliability are analysis to be tested, not settled fact — but if Japanese or Korean buyers begin repricing or restructuring term negotiations with Australian exporters ahead of the 2027 start date, that will be the first concrete evidence of whether the scheme is shifting Australia's position in the global LNG trade.