Labor dials back gas reservation scheme, denies the move is a policy back-down

Labor has been coy about exactly how a scheme to set aside gas for Australians will affect energy prices, as it backs away from its most stringent demands on the resource’s producers.

Australian gas suppliers will now only need to offer up to one fifth of their exports to the domestic market under the proposed reservation scheme, rather than a mandatory 20 per cent originally floated in May, with no floor to be enforced. 

The move would still put “downward pressure” on energy bills for the roughly 5.1 million homes and heavy industry powered by gas, but Energy Minister Chris Bowen did not say what kind of windfall Australians could expect. 

“We’re not setting a price target, floor, ceiling – this is about supply, not price,” Mr Bowen told reporters on Thursday.

“Our analysis and the analysis of industry shows us that this policy is what gives us the best chance of having gas at competitive prices.”

The reservation scheme’s onset will also be delayed by 12 months – to July 2028 – to align with gas companies’ existing contracts, Mr Bowen announced.

The revision from a mandatory 20 per cent was so producers did not need to pump unneeded gas into an already well-supplied market, he said, denying the change amounted to backing down. 

“The 20 per cent figure is still the absolute core of the policy, but there’s no point reserving gas that Australians don’t need,” he said. 

There would also be additional flexibility to that obligation based on the national energy regulator’s calculation of 110 per cent of Australia’s demand, which would ensure oversupply. 

It remains unclear how the policy will apply to Western Australia, which has its own gas reservation scheme.

The overhaul was triggered by soaring gas prices due to Russia’s invasion of Ukraine, along with shortages of up to 140 petajoules – enough to power 3.5 million homes for a year – forecast on Australia’s east coast as companies made more lucrative deals with overseas customers.

The national consumer watchdog in July flagged a heightened risk of shortfalls over winter 2027 if producers export all of their uncontracted gas, although that possibility is highly unlikely.

Labor’s original policy faced staunch criticism from smaller producers who feared flooding Australia with cheaper gas would shove them out of the domestic market. 

The scheme’s initial announcement in May also raised eyebrows over theories it served to mollify advocates calling for a windfall tax on gas companies, who piled pressure on the government ahead of the federal budget. 

“(The reservation scheme) is a serious economic reform,” Mr Bowen said when asked about the possibility of the much talked-about tax. 

“Frankly, much more impactful than some of the ideas I see flying around … we are not doing that.”

Source: AAP