My previous article, “The Great Australian Gas Robbery,” looked at how Australia went from having a largely domestic gas market to becoming one of the world's major LNG exporters, while Australian consumers and businesses were increasingly exposed to higher gas prices.
But if connecting our domestic gas market to the international market created some of these problems, what is the answer?
One increasingly discussed solution is domestic gas reservation.
The idea sounds simple: if Australia owns the resource, should some of that gas be reserved for Australians before it is made available to overseas buyers?
On the surface, it is a compelling argument. But, as with most things in the Australian energy market, the answer is not quite that simple.
How Did We Get Here?
From around 2010, massive investment flowed into LNG and gas infrastructure. By 2014, Australian gas production had reached record levels, while billions of dollars were being invested in projects designed to turn Australia into a major LNG exporter.
The fundamental change was the connection of Australia's east-coast gas market to the international LNG market.
Before this transition, Australia's east-coast gas market was largely a domestic market.
After LNG exports began, Australian gas producers had access to a much larger international market where gas could command a significantly higher price.
That created enormous benefits for Australia.
But it also fundamentally changed the economics of the domestic gas market.
What Did Australia Gain?
There is no doubt that the LNG boom delivered substantial benefits.
1. Australia Became a Major LNG Exporter
The investment in LNG infrastructure turned Australia into a significant global gas supplier.
This generated export revenue, foreign investment, construction activity, jobs and government revenue through taxes, royalties and other payments.
2. Investment Unlocked Gas Resources
The LNG boom encouraged investment in new gas fields, pipelines, processing facilities and export infrastructure.
Without that investment, some of Australia's coal-seam and conventional gas resources may not have been developed on the same scale.
There is another discussion to explore in a future article: the economic windfalls and pressures, alongside the arguments for preserving land, fauna and food-producing regions.
That article will consider how we measure the benefits and costs of two distinctly different industries and markets, including how these choices may affect Australia's standing as a quality global food producer. This is not only an economic discussion, but one that also needs to consider social priorities.
3. Gas Production Increased Substantially
Australia was producing more gas than ever before while simultaneously increasing exports.
This is important because the initial problem was not simply that Australia did not have enough gas.
We had gas. We were producing more of it.
The problem was increasingly where that gas could be sold and at what price.
4. Australia Gained Access to International Markets
Connecting the east-coast gas market to LNG exports created an internationally competitive market for Australian gas producers.
In theory, this provides stronger investment incentives and allows Australian gas to be sold where it is most valuable.
5. LNG Exports Supported the Broader Economy
LNG exports contribute to Australia's trade balance, investment, GDP and government revenue.
These benefits should not be dismissed.
It would therefore be wrong to suggest that the LNG industry has been bad for Australia or that the decision to develop an export industry was simply a mistake.
It wasn't.
The question is whether Australia got the balance right.
What Did Australia Lose?
This is where the story becomes more complicated.
1. The Domestic Market Became Exposed to International Prices
Before LNG exports, Australian gas producers were primarily supplying an Australian market. This market was limited, which constrained the opportunities for local gas producers and investors to expand.
Once export terminals connected Australian gas to international markets, producers gained another option.
They could sell their gas into the domestic market, or into an international market where prices could be higher.
The important change was therefore not simply:
“Australia started exporting gas.”
It was:
Australian gas producers gained access to a much higher-priced international market, while Australian consumers remained dependent on the same resource.
That fundamentally changed the economics of the domestic market. I am personally not too sure that our politicians and so-called experts in government who were assigned to our energy and resource portfolios really understood or considered all of this sufficiently.
2. More Gas Did Not Necessarily Mean Cheaper Gas
This is perhaps the most important point.
Australia could produce more gas than ever before, and domestic prices could still rise.
Why?
Because the relevant question changed.
It was no longer simply:
“How much does it cost to produce Australian gas?”
It increasingly became:
“What price could the producer receive by selling that gas elsewhere?”
This is the concept of opportunity cost.
In simple terms, if an Australian gas producer can sell its gas for more overseas, that international price influences what it is prepared to accept from an Australian buyer.
That is the fundamental change created by linking the domestic market to international LNG markets.
3. Australian Manufacturers Lost a Historical Advantage
Gas-intensive industries had historically benefited from relatively cheap domestic gas.
Higher gas prices increase operating costs for manufacturers, particularly industries such as chemicals, fertiliser, glass, ceramics, food processing and other gas-intensive businesses.
This creates an important distinction between GDP and broader economic welfare.
LNG exports can increase GDP, investment, employment and government revenue while higher domestic gas prices simultaneously make some Australian businesses less competitive.
Both things can be true at the same time.
This is an important part of understanding what happened to the Australian gas market.
4. Households Can Ultimately Bear Part of the Cost
Higher wholesale gas prices can flow through to household heating, cooking and electricity costs. Gas is also important to electricity pricing because gas-fired generators can be called upon when renewable generation is insufficient.
Only this last week, the Queensland State Government announced the opening of a new gas peaker joint venture between CS Energy and the state. This suggests that gas remains part of the conversation around renewable energy firming and backup supply.
Therefore, expensive gas can affect both the gas bill and, indirectly, the electricity bill.
5. Domestic Buyers Lost Some of Their Traditional Bargaining Power
Once LNG export terminals were operating, domestic buyers were no longer negotiating in a purely domestic market.
A producer could effectively say:
“If the domestic buyer won't pay the required price, there is an international market that will.”
It is important to understand that this is not necessarily unreasonable behaviour by the producer.
As mentioned previously in this article, businesses will naturally seek the best commercial return they can achieve.
The real question is whether the market structure and government policy were designed to protect Australia's broader interests when this change occurred.
So, Is Gas Reservation the Answer?
This brings us to the question at the heart of this article.
If connecting the domestic market to international prices has created problems, should Australia reserve some of its gas for domestic use?
There is a strong argument for doing so.
Australia has abundant natural gas resources. Australians need gas. Australian manufacturers need gas. And gas can also play an important role in Australia's electricity system.
So why shouldn't a portion of Australia's gas be reserved for Australians first?
The Case for Reservation
Domestic Supply Security
A domestic reservation policy could help ensure that Australian consumers have access to gas even when international markets are tight.
Potentially More Competitive Domestic Prices
Increasing the amount of gas available to the domestic market could reduce some of the influence of international LNG prices.
Support for Australian Manufacturing
More predictable and affordable gas supplies could help gas-intensive Australian businesses remain competitive and support domestic industry.
Energy Security and Supporting the ISP
Maintaining an adequate domestic gas supply has value beyond simply keeping prices down. Gas may be required for industrial processes and electricity generation, particularly during periods when renewable generation is insufficient.
One of the main aims of the Integrated System Plan (ISP) is to support energy security as Australia transitions towards renewables and improves its carbon footprint. Gas may continue to be required for firming to help make that transition possible.
Keeping More of the Resource Benefit in Australia
If Australians own the underlying resource, there is a reasonable argument that some of its benefits should flow directly to Australian consumers and businesses rather than being determined entirely by international market prices.
But There Are Also Risks
Reservation is not a magic solution.
If government requires producers to sell a portion of their gas domestically at prices below what they could achieve internationally, the economics of developing new gas resources can change.
That could reduce investment incentives, which was a concern before 2010.
Australia also competes internationally for capital. If policy intervention becomes too restrictive or unpredictable, investors may simply choose to invest elsewhere.
And reservation does not automatically mean cheap gas.
There are still costs associated with finding, extracting, processing and transporting gas. Global resources are already more expensive, and the cost of doing business has increased dramatically over the last five years.
A reservation policy can influence the price and availability of gas, but it cannot make the underlying costs disappear.
There is also a broader economic cost to consider.
If less gas is exported, Australia could receive less export revenue and potentially less associated tax and other economic benefits. With the level of debt that most state and federal governments face, revenue from our natural resources is an important consideration.
According to the Office of the Chief Economist's Resources and Energy Quarterly (September 2025), Australia's LNG export earnings were forecast at approximately $65 billion for 2024–25. Meanwhile, the Commonwealth's Mid-Year Economic and Fiscal Outlook 2024–25 estimated Petroleum Resource Rent Tax (PRRT) receipts at approximately $1.4 billion for that financial year.
These figures highlight an important question: how much of the value generated by Australia's LNG exports flows back to the Commonwealth through the PRRT?
The comparison is not a complete measure of the government's total return from gas production, as it excludes other taxes, royalties and economic benefits. Nevertheless, it raises a legitimate question about whether Australia is receiving an appropriate return from the extraction of its finite natural resources.
Any change to reservation policy needs to consider both sides of the equation: the potential benefits of more secure and affordable domestic gas supplies, and the possible implications for investment, exports and government revenue.
The Bigger Question
This brings us back to the issue raised in “The Great Australian Gas Robbery.”
The problem was not that Australia developed an LNG export industry.
The LNG industry has delivered enormous investment, export revenue, employment and economic activity.
The question is whether Australia went too far in allowing a resource that was historically serving a domestic market to become exposed to international prices without adequately considering the consequences for Australian consumers and industry.
In simple terms, this is what changed:
Before LNG Exports
Australian gas → Australian market → Australian price
After LNG Exports
Australian gas → Australian market OR international LNG market → international price influence
And that is the fundamental structural change.
The debate over gas reservation is therefore not really about whether Australia should export gas.
It is about whether Australians should receive some protection from the international market created by their own resource.
There is a legitimate economic argument on both sides.
Australia needs investment.
Australia needs export revenue.
Australia needs a viable LNG industry.
But Australia also needs affordable and reliable energy for its households, businesses and manufacturers.
The challenge is finding the point where Australia's gas resources work for both.
That, ultimately, is the real question behind domestic gas reservation.