Originally published by Perry Williams of The Australian
12.07.2026
Santos has taken aim at Chris Bowen’s domestic gas reservation scheme for deliberately causing harm to its GLNG export venture, while also kneecapping its $4bn Narrabri gas field development in NSW.
The criticism came as SGH boss Ryan Stokes called on the government to delay the reservation scheme until 2030 over fears local producers may not survive.
The policy would mandate 20 per cent of all LNG exports to be supplied to domestic users from July 2027, but producers are worried it will lead to a glut of gas and artificially lower prices, leading to domestic producers to abandon developing new projects.
The Santos-backed Gladstone LNG venture (GLNG), which relies heavily on third-party gas purchases and swap arrangements to fulfil its export commitments, hit out at elements of the planned scheme given its exposure along with its two rivals: Origin Energy’s APLNG and Shell’s QCLNG.
“GLNG has no uncontracted gas and requires all of its reserves to service its minimum LNG contract commitments,” Santos said in a submission on the proposed scheme. The policy “would allow LNG exporters with surplus gas to reduce their domestic gas sales and increase their LNG spot export sales, while imposing retrospective imposts on projects such as GLNG that have no surplus gas.”
Santos also took aim at a merit-based ranking for complying with domestic gas obligations.
“The rules appear specifically designed to cause harm to GLNG and to assist APLNG and QCLNG to export more uncontracted gas to the LNG spot market and reduce or avoid offering uncontracted gas to the domestic market first,” Santos said.
Mr Stokes also weighed into a chorus of criticism from industry over the Albanese government’s gas blueprint, saying there was no immediate gas shortfall and calling for a three-year delay given the potential sector-wide damage.
“The government’s own modelling says there’s no issue with supply until 2030. This isn’t about a shortage. This is just about manipulation of price to benefit a small number of multinational manufacturers,” Mr Stokes told The Australian. “It will decimate the domestic gas market as a result.”
Beach Energy, which part-owned by SGH, said the policy would force a transfer of revenue from domestic-focused Australian gas producers to a small number of large wholesale buyers, dominated by offshore players.
Santos has for years pledged its Narrabri gas field could fix a looming east coast gas shortage, and help back up the state’s renewables-reliant grid, but said it could be a casualty of the government intervention.
“Over time, the domestic market would be increasingly reliant on the diversion of gas from existing export developments,” Santos said in its submission.
“Domestic projects, potentially including Santos’s Narrabri project in NSW, which is 100 per cent committed to the domestic market, would be crowded out.”
Last week Queensland also weighed in, calling for the reservation scheme to be delayed, and blasting the policy for cutting its royalties from LNG exports. It has also demanded Canberra re-examine the state’s GST allocation due to its heavy lifting in the resources sector.
Santos said it backed prospective reservation but opposed the current proposal because it will create gas supply shortfalls and make gas prices higher for power generation, manufacturers and data centres.
SGH owns Boral, one of the country’s largest industrial gas users, while SGH Energy owns the Longtom gas field in Victoria along with a stake in the Crux LNG project.
Rather than scrapping the proposal altogether, SGH has urged the government to redesign the scheme so reservation obligations are triggered only when genuine domestic gas shortages emerge.
It wants to exempt export projects with no physical connection to Australian gas markets, and allow producers to satisfy their obligations by genuinely marketing gas to domestic buyers rather than mandating sales.
“There should always be a requirement for Australian gas to serve an Australian market but it has to be working to support long-term supply and ensure the domestic sector is not the casualty of achieving that aim,” Mr Stokes said.
Modelling by Beach Energy shows Labor’s proposed gas policy could worsen peak day shortfalls in the east coast market by 2027, two years earlier than expected, by knocking out southern production that helps meet demand peaks in winter.
Manufacturers have demanded Australian energy producers are banned from negotiating carve-outs from the policy and expect the scheme will deliver supplies below $10 a gigajoule for industrial customers.
Average contracted gas prices have been in the $13-15/GJ window, while the spot price has ranged from $7-11/GJ in 2026.
Manufacturing Australia put forward a list of “core non-negotiables” in its final feedback to the government, and warned against relying on administrative discretion which may open the door to producer lobbying.
EnergyQuest modelling indicates a 15 per cent reservation rate on new LNG contracts would be more than enough to avoid annual shortfalls past 2035, rather than the blanket 20 per cent rate.
