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Senex Energy, the supplier of one-tenth of the east coast domestic market, has labelled Labor’s proposed gas reservation scheme “perverse in the extreme” and says it means the market is being “intentionally broken”.

The Queensland-based producer, which is owned by South Korean steel giant Posco and mining billionaire Gina Rinehart, said the 20 per cent domestic reserve requirement on LNG exporters would create a glut in the east coast market that would be classified as “dumping” were the gas coming from overseas.

But in this case, the government is engineering the oversupply itself through its proposed scheme, said Senex chief executive Darren Stevenson, describing the situation as “mind-boggling”.

“If this was China bringing steel in and doing essentially the same thing, it would absolutely be dumping, and the same people who are promoting this as a good idea would be the first to complain about that,” Stevenson said.

“We will continue to grind away, trying to explain to everyone who will listen that there is a better way.”

Consultation for the scheme, which has been under way for the past several months, has already caused “irreparable damage” to Australia’s relationships with its most important trade and investment partners in Asia, Senex said in its submission to the government.

The scathing assessment adds to the storm of criticism over the scheme over the past week from gas industry leaders and leading businessmen such as Ryan Stokes, who said it would “destroy” small gas producers and weaken the Australian economy.

Australia’s biggest LNG customers, including Japan, South Korea and Malaysia, are also watching with grave concern because of the likely impact on their gas imports.

They feel they have been embarrassed by Australia because the key elements of the reserve scheme were announced just days after each inked pacts with the Albanese government on energy security, guaranteeing precious supplies of petrol and diesel for Australia during the global energy crisis sparked by war in the Middle East.

The domestic gas reserve, which is broadly supported by most manufacturers battling to secure long-term supplies of affordable gas, is due to come into effect on July 1, 2027, despite the many details still to be sorted and gas producers’ warnings of unintended consequences.

Posco voiced its deep worries about the scheme directly to Federal Resources Minister Madeleine King and government officials last week in a meeting in Canberra involving its global head of oil and gas Tong Il Kim – who is also chairman of Senex – and Stevenson.

Hancock Energy, the part of Rinehart’s Hancock Prospecting group that holds the stake in Senex, is equally concerned about the “fundamental flaws” in the reserve plan, Stevenson said.

Senex revealed in its submission that in discussions with government and department officials on its concerns, it has been advised verbally to plan to sell its gas to the LNG export projects in Queensland in future, instead of to the domestic market where prices would not drive investment.

Those LNG ventures would then supply the domestic market from their 20 per cent domestic supply obligation imposed under the scheme.

“It is perverse in the extreme that a domestic gas reservation scheme is being designed to push domestic gas to export projects because the market is being intentionally broken,” Senex said.

“Surely the intent of the policy is not to push domestic gas producers out of the domestic market and instead position us as suppliers of gas to the export projects, who in turn deliver that gas to the domestic market via their domestic supply obligations.”

Stevenson said Senex has repeatedly suggested to the federal government that it follow the successful Queensland state policy on domestic gas reservation, but had got no traction.

That scheme involves the release of gas acreage specifically for gas that can only be supplied into the local east coast market, rather than sold to be exported as LNG.

“We’re not naive, we know that reservation is going to happen,” he said.

“It’s just quite frustrating that when you are literally the case study of it working successfully [in Queensland] and bringing more supply and bringing security to the manufacturers in Australia that you’re not getting listened to about what a better way might be.”