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US energy giant Chevron has warned the Albanese government its looming intervention into the east coast gas market may damage investor confidence, as new modelling shows an urgent pipeline of gas power plants could stall due to unfavourable economics.

The Labor government is finalising its plan for the biggest shake-up of Australia’s east coast gas market in decades as it moves to head off a looming shortfall, with federal cabinet due to meet on Monday to finalise a gas reservation scheme.

Chevron Australia president Balaji Krishnamurthy said a federal Labor interventionist policy would give it cause for concern.

“We can support some of the prospective reservation policy,” Mr Krishnamurthy said. “We can see prospective policies moving forward once we know the rules of the game. As companies, we can all take that into account as we invest in things. But often when things are made retrospective, that’s (when) I think it becomes more challenging, and it gives us all a pause to consider what it means for other things that could change with time.”

Labor has earmarked a reservations scheme on Queensland’s three LNG exporters as its preferred model, allowing exporters to continue shipping gas as long as they make a net contribution to the domestic market.

Such a scheme would be a hammer blow to the Santos-backed Gladstone LNG, which is the only producer to buy gas from the domestic market for export. Its rivals led by Shell and Origin Energy produce more gas than they export via long-term contracts.

Most in Australia’s gas industry have begrudgingly accepted a reservation scheme, with the exception of Santos, which has warned it could be forced to break export contracts on which allies such as Japan rely.

Anthony Albanese said no decisions would be made on Monday.

“What we do is … proper analysis and discussion through a cabinet government that I lead and we’ll do that. We’ll have discussions this week, next week (and) we’ll make an announcement before the end of the year,” the Prime Minister said on ABC.

New modelling shows that while over 10,000 megawatts of new gas for power supply may be needed by the mid-2040s, most proposed projects are unable to reach expected commercial return thresholds under current national electricity market arrangements.

Neither independent generators nor vertically integrated retailers can reach the internal hurdle rate required to finance new firming capacity under the status quo, while no major gas project is committed in either Victoria or NSW, a report commissioned by the Australian Pipelines and Gas Association shows.

The Marsden Jacobs Associates report said a failure to install enough new gas supply into the power grid could lead to substantially increased energy prices of more than $50 per megawatt hour annually.

It concluded the level of gas-powered generation required to ensure supply reliability in the power market does not satisfy the 9 per cent internal rate of return specified by the Australian Energy Market Operator in its step change scenario.

“This demonstrates that without changes to market signals, insufficient gas-powered generation will be developed. This would have consequences to the level of reliability achieved, electricity prices, and by association the reform process,” the report said.

Labor has insisted the government recognises gas will remain crucial through the energy transition, but the government also continues to signal a tougher line on producers.

Officials involved in the review have repeatedly pointed to what they describe as “market failures” on the east coast, where demand is rising even as production in the Bass Strait declines.

With the review set to be released within weeks, the outcome will serve as a fresh test of Australia’s ability to balance domestic energy security with the need to attract global capital. For now, industry leaders are watching closely – and making clear that Canberra’s decisions will echo far beyond the east coast.

MST Marquee analyst Saul Kavonic said there remained concern over the final outcome of the policy review.

“This is the opportunity to make this the final gas market intervention that replaces the failing patchwork of policy mechanisms with a simpler and sustainable reservation that stops the cycle of market interventions every few years since 2015,” Mr Kavonic said.

“Or this could be another botched gas policy that deters investment and is repealed and changed once again in 18 months. There is increasing concern this could be the latter.”

The Greens have said they will oppose a scheme under consideration by the Albanese government to overhaul Australia’s east coast gas market, sharpening a political clash over how Canberra should respond to the looming supply crunch flagged by energy authorities.

Chevron’s comments follow its approval of a $3bn Gorgon expansion, a decision that came just months after the company had previously raised doubts about whether it would push ahead with the development, warning that successive interventions – including emergency price caps in 2022 – had eroded investor confidence.

The Chevron comments inject fresh tension into a debate that has pitted the federal government’s climate and cost-of-living priorities against industry calls for a stable investment pathway. Canberra has argued that stronger domestic obligations are necessary to protect households and manufacturers from volatile global markets while ensuring sufficient supply as coal exits the grid.