Gas reserve scheme for south-east on the table as government searches for answer to 2029 shortfall warning

The prospect of a gas reservation scheme could be revived by Labor, with ministers signalling the sector's supply of gas to Australia is under review and noting that states with schemes already in place have been able to operate successfully.

Newly appointed Industry Minister Tim Ayres would not rule out possible laws that would force gas producers to reserve some of their supply for the domestic market.

"We've got our focus on what happens over the next three to five years, and [Resources Minister] Madeleine King has made it pretty clear, we are focused on making sure the mechanisms that are there, and the packages that are there, are delivering the purpose they need to deliver," he told Sky News.

"What we're not going to do is do what the Coalition did during the election campaign, which was policy on the run.

"The Coalition ran around pretending to be the best friend the gas industry had … then at the last second cobbled together a pretend reservation strategy that would have delivered a sixth of what the government had already delivered."

Federal and state governments are doubling down on gas, with a warning from the Australian Energy Market Operator (AEMO) that the south-eastern states face shortfalls from 2029.

This week, Victoria green-lit a controversial gas import terminal in Geelong, and the federal government signed off on a multi-decade extension to Western Australia's North West Shelf project.

In a major speech to the industry this week, the resources minister put the sector on notice that its social licence depended on pumping more affordable gas into the domestic market.

Labor searches for answer to shortfall warnings

While Western Australia and Queensland have rules requiring multinational gas companies to hold some of the gas they drill for the domestic market, there is no "gas reserve" for the south-eastern states.

And, the east coast, which sits on a different energy grid to the west, has been warned of gas shortfalls as soon as 2029 due to the dwindling supply set aside for domestic use.

While the idea of an East Coast Gas Reserve has been popular in Labor circles, it has traditionally been opposed by the Coalition.

But Peter Dutton unusually took a promise to the federal election to establish a gas reserve on the east coast that would force gas producers to hold up to 100 petajoules for the domestic market, equivalent to about a fifth of demand.

The Coalition claimed doing so could also lower household power prices by 7 per cent.

That move has opened political ground for the government to consider a gas reserve for the east coast — something the industry understood was already being developed by Labor as a response to Mr Dutton's policy, but was ultimately not taken to the election.

Minister points to successful gas states operating under reserve laws

Under WA's gas reserve mechanism, long-term contracts are negotiated with developers at a project's inception to require a certain amount of that project's gas production to be kept for Australian use.

In a statement, Ms King said the gas industry had been able to successfully operate in WA, as well as under a similar policy in Queensland.

"Queensland and Western Australia are our two biggest gas exporters and they both have state-based gas reservation schemes," the resources minister said in a statement.

"The government will progress the planned review of gas market frameworks and the role of market bodies to ensure more gas is made available for Australians."

Gas producers have opposed the idea of a reserve that would apply to already-established projects, saying the business cases for those projects were developed with a set percentage to be exported.

Gas has been centre-stage in the days since the election, with Environment Minister Murray Watt on Wednesday approving the extension of Australia's largest oil and gas project, North West Shelf, from 2030 to 2070.

That decision has also brought Woodside a step closer to approval for its proposed expansion into the Browse Basin and a 900-kilometre pipeline that would be connected to the North West Shelf processing facility in Karratha.

But it has prompted fury from climate groups that say it threatens Australia's aims to reach net zero emissions by 2050.

Overnight, the Victorian government also confirmed environmental approval for a gas import terminal in Corio, setting up the state to bring in gas from interstate or overseas.

If Viva Energy proceeds with the terminal it would be able to supply up to 160 petajoules of gas, about 88 per cent of the state's current consumption.

The state government said that would help to ward off the AEMO's warnings of supply shortfalls from 2029.

In an opinion piece in the Canberra Times, independent senator David Pocock wrote that there was not a shortage of gas — it just wasn't being sent to Australia.

"Over the past decade, east coast gas production has doubled. Prices have tripled," he wrote.

"Domestic demand is falling, yet households and manufacturers are paying through the nose because more than three-quarters of our gas is exported or used in export processing."