Australia’s proposed national gas reservation scheme could extend to the Shell-operated Prelude floating LNG project, after Resources Minister Madeleine King declined to rule out its inclusion.
The plan is under consultation and is scheduled to start on 1 July 2027. It would require covered LNG ventures to reserve 20% of gas for the domestic market. The government said the scheme is intended to apply nationally and to support gas supply for manufacturers, power generators and households.
Prelude is located about 200 km off the Kimberley coast and is not connected to a mainland gas pipeline system. The project is not covered by Western Australia’s existing domestic reservation program.
Analysts said applying the requirement to Prelude would be difficult because the project was developed as a floating export facility after an onshore pipeline was not considered economic. Without pipeline access, it could need to buy gas from domestic producers in Australia to meet the obligation.
The proposal has also raised concerns for Ichthys LNG and Darwin LNG in the Northern Territory, where local gas demand is limited and pipeline links to the east coast grid are small.
Kaushal Ramesh, Vice President, Gas and LNG, at Rystad Energy, said a domestic supply obligation is more logical when a resource could have been developed for a sizeable local market. He said Western Australia has such demand, while the Northern Territory does not yet.
Ramesh also questioned why the government was considering measures that could reduce confidence in Australian LNG at a time of heightened global LNG demand and constrained transit routes.
A spokesperson for King said consultation on the operation of the scheme is continuing. Shell declined to comment before submissions close on 30 June.
Tatsuya Terazawa, head of the Institute of Energy Economics, Japan, said Western Australia and the Northern Territory lack infrastructure to move gas to Sydney and Melbourne. He said Western Australia should be exempted because it already has a state reservation system, and questioned how a 20% requirement would help in the Northern Territory.
Inpex, which has stakes in Prelude and Darwin LNG, said Ichthys LNG has fundamental physical and commercial constraints on supplying additional domestic gas beyond Darwin. Senior Vice President Corporate Bill Townsend said new supply from gas exploration, development and infrastructure, particularly in Victoria and NSW, would be the best way to address potential east coast shortages and high prices.
