Federal Labor warned east coast gas reserve will only lower energy costs if new supply is unlocked

The Albanese Government needs to fast-track gas supply to make its east coast gas reservation policy meaningful, says Australia’s peak group for energy producers.

Federal Labor on Monday unveiled a plan for up to 25 per cent of new gas output on the east coast be reserved for domestic use, in a bid to curb soaring electricity costs across most of the country.

WA already has a 15 per cent reserve in place.

Australian Energy Producers chief executive Samantha McCulloch said there was industry support for a domestic gas reservation scheme linked to new supply, but the design and implementation needed more “careful consideration”.

“As we said from the outset of this review, a well-designed, prospective reservation policy can provide certainty for gas producers and users to invest with confidence,” she said.

“However, a reservation policy alone will not fix the east coast gas market.

“Bringing new supply online sooner, including in the southern states that are facing shortfalls, is the only sustainable way to put downward pressure on prices and keep the market well supplied for the long term.”

Ms McCulloch also cautioned against some elements of the proposed reservation policy, like requiring producers to sell rather than offer reserved gas to the market on reasonable terms.

“The risk of artificially oversupplying the market will impact new investment decisions and ultimately damage long-term supply prospects,” she said.

“The Australian Competition and Consumer Commission has confirmed that past market interventions have increased the risk of shortfalls by delaying and disincentivising investment. That’s why it is vital that we get these reforms right.”

The ACCC on Monday released its supply forecast for Australia’s east coast gas market for the second quarter of 2026, predicting another “tight” quarter with Victoria, New South Wales, South Australia, Tasmania and the Australian Capital Territory having to rely on excess surplus from Queensland to meet demand.

A spokeswoman for Shell said more work needs to be done to “sustainably increase supply in a way that avoids distorting investment signals”, while APA chief executive Adam Watson urged the Government to do more to incentivise private investment.

“APA is ready and willing to continue to invest in the infrastructure required to transport and store more gas around the country, but the regulatory and policy settings must encourage this investment,” Mr Watson said.

Shadow resources minister Susan McDonald said the Albanese Government had been “dragged kicking and screaming” into a domestic gas supply policy.

She criticised the policy for providing “no detail” as to how the Government would support new gas investments, new gas infrastructure, or remove “their failed interventions”.

“While Labor’s recognition that we need a gas reservation is welcome, it is too little, too late — it will not commence market-wide until 2027 and their policy will not address the very immediate possible shortfalls, with the ACCC today reporting potential east coast shortfalls in winter of 2026,” Ms McDonald said.

“Labor’s detail-free policy does not address the root causes of this gas policy failure: a continued lack of investment in new supply by gas-reliant states, insufficient investment in critical gas infrastructure like storage and pipelines, and the repeated failed market interventions which have not brought down prices or secured supply, and undermined gas investment appetite.”

After unveiling the gas reserve policy, Climate Change and Energy Minister Chris Bowen said Australian gas “should be available to Australians at reasonable prices”.

“Most Australians think it makes no sense that Australia can be one of the largest gas producers and exporters in the world, and yet we have report after report showing us that there are gas shortages for domestic use in coming years,” he told reporters in Canberra.

Mr Bowen said a 15 to 25 per cent target “would be enough, not only to cater for the domestic shortfalls at a forecast, but obviously to slightly over supply the Australian domestic market, which is the right policy approach”.