Gas reservation scheme a win for manufacturing, if it delivers

Australian energy customers will get first dibs on gas produced locally in a move celebrated by a manufacturing sector squeezed by high fuel costs.

Gas exporters will be forced to reserve between 15 and 25 per cent of gas for domestic use under a widely anticipated policy move from the federal government.

The regime applies to gas contracts entered into from Monday, but will come into full effect from 2027.

Manufacturers were quick to applaud the move, provided it delivers the lower gas prices promised by Energy and Climate Change Minister Chris Bowen.

“To be effective, reservation must materially reduce local gas prices,” Manufacturing Australia chief executive officer Ben Eade said.

Despite Australia’s massive reserves of the energy source, wholesale gas prices have jumped from lows of $4 a gigajoule to $12 a gigajoule or more, putting pressure on steelmakers and other heavy industry reliant on the fuel to produce goods.

Monash Business School energy policy expert Guillaume Roger said the gas reservation scheme, which effectively sets aside a predetermined quantity of gas out of any new extraction for domestic use, was designed to lower prices.

But it was not clear to Professor Roger how much of a reduction to expect.

“That depends on a lot of things,” he told AAP: how quickly new projects came online, and how cheaply and effectively supply could be transported to the southern states as the Bass Strait projects are depleted.

Options to solve congestion issues involve expanded pipelines from Queensland, Prof Roger explained, or building import terminals in places such as Newcastle or Melbourne so liquefied gas can be transported by ship.

While Governments have been under pressure to lower gas prices, the country is also trying to curb fossil fuel use in pursuit of climate goals.

Industry Minister Tim Ayres said the gas reservation scheme was designed to support heavy industry businesses without quick pathways to electrification and decarbonisation.

The Federal Government was also simultaneously helping industry move from gas to electrical heating processes with concessional finance, Senator Ayres told reporters on Monday.

Greenpeace Australia Pacific campaigner Geoff Bice said the reservation scheme risked locking the nation into more gas production and exploration that was not needed.

“While this policy does make some long overdue steps to curb the export rorts, it is alarming that the government is continuing to double down on new gas - despite the clear reality that Australia already has more than enough gas to meet our domestic needs,” Mr Bice said.

“If implemented effectively, this reservation policy should mean no new gas projects are needed - but without strong guardrails, it risks entrenching our dependence on expensive, harmful fossil fuels even further.”