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Labor has privately told LNG exporters the policy will apply to export volumes rather than merely uncontracted gas – a dramatic shift that leaves Santos-led Gladstone LNG directly exposed, and could reshape the east coast gas market.

The clarification, delivered in briefings between departmental officials and LNG producers over the past 24 hours, marks a significant departure from the impression left publicly by Mr Bowen, who suggested on Thursday the reservation requirement would apply only to uncontracted LNG gas.

Had that interpretation stood, the impact on Gladstone LNG, of which Santos owns 30 per cent, would have been negligible because the project has no uncontracted gas available for export.

But sources said LNG exporters have now been told the 20 per cent obligation will be calculated against exportable volumes – or gas loaded onto LNG cargoes – although deductions will be permitted for gas used to operate plants and for volumes already supplying domestic customers.

The revised interpretation significantly expands the reach of the policy. Gladstone LNG, which relies heavily on third-party gas purchases and swap arrangements to fulfil export commitments, has long attracted criticism from rival producers for this reason. Santos disputes that Gladstone LNG has contributed to east coast shortages.

Instead, the government’s revised position means exporters will still be required to ensure domestic supply obligations are met irrespective of existing export contracts.

Sources said if LNG exporters like Gladstone LNG can’t honour their obligations with their own supply, they may have to purchase gas from other LNG producers or third-party suppliers.

The clarification has triggered a fresh scramble across Queensland’s LNG sector as producers assess how to comply with the policy without disrupting long-term agreements with buyers in Japan, South Korea and China.

Following a meeting of ministers on Friday, Queensland energy minister David Janetzki issued a terse statement amid fears the state will be unfairly slugged by the reservation policy move.

“Today, I again expressed concern that Queensland’s contribution to national energy security and resource development is being penalised under the current GST system, while States that restrict development are effectively rewarded,” Mr Janetzki said.

While details of the scheme are still being finalised, Queensland loses under every scenario according to MST Marquee.

“Queensland will face a lower royalty take and lower production under every scenario of a reservation policy on our analysis,” said Saul Kavonic, MST Marquee’s head of energy research.

Western Australia and the Northern Territory are also both concerned over the reservation changes. WA had a longstanding 15 per cent local use provision but that may have to increase to 20 per cent under the national scheme. NT producers say they should be exempt due to a lack of infrastructure to provide gas to the local market but officials have also pushed back on that argument and raised the prospect of gas swaps to ensure they comply.

Industry sources said LNG exporters had been told they would first need to pursue commercial alternatives before seeking exemptions from the scheme – relief that market participants believe would only be granted in exceptional circumstances.

That effectively leaves Gladstone LNG with three options.

The project could purchase excess domestic gas from rival LNG exporters such as Australia Pacific LNG, jointly owned by Origin Energy and ConocoPhillips, or Shell’s Queensland Curtis LNG development. It could also expand swap arrangements with competitors, or underwrite new gas developments capable of feeding additional supply into the east coast market.

The latter approach would mirror arrangements Santos has already pursued through supply agreements involving Senex Energy, the Queensland producer backed by Gina Rinehart.

Speaking about the uncertainty created by Mr Bowen’s comments, Santos chief executive Kevin Gallagher said the company supported a reservation policy that encouraged new gas supply but warned the government’s announcement had created confusion across the market.

“Minister Bowen was clear yesterday in saying “It applies to prospective contracts and the spot market. We will not disturb any existing contracts.” Likewise, Minister King was very clear, saying “So from July next year, if LNG exporters want to access the quite lucrative from time to time international spot market, they will need to demonstrate to me as minister that they have actually and properly supplied the domestic market,” said Mr Gallagher.

”I am very confident they mean what they say and will honour that promise, not only to LNG exporters, but to countries like Japan, Korea and Malaysia who are counting on their word and who are reciprocating by supporting Australia’s liquid fuel security in this very uncertain global environment. We will await the detail that all market participants need to plan for the future and restore market and investment confidence in Australia.”

Analysts said the revised interpretation transformed Labor’s proposal into a significantly more interventionist policy than the market initially believed.

Had the mechanism only captured uncontracted LNG supply, the practical impact on exporters would likely have been modest because relatively little east coast gas remains unsold. Applying the requirement against export volumes instead forces LNG producers to actively source or support additional domestic supply while preserving export commitments.

The policy also risks intensifying competition between Queensland’s three LNG exporters as each attempts to secure enough gas to satisfy the reservation threshold at the lowest possible cost.

Queensland’s LNG sector already operates through a highly interconnected network of transportation agreements, gas swaps and third-party supply deals.

Santos has previously rejected suggestions that Gladstone LNG can simply divert export gas into the domestic market without jeopardising long-term LNG contracts, which the Albanese government has acknowledged are effectively sacrosanct.

Canberra can ill-afford disruptions to export agreements relied upon by strategic allies such as Japan and South Korea – the same countries Australia depends on for critical imports including refined fuels such as petrol and diesel.