Information about EnergyQuest’s ‘LNG and energy essentials’ report is available by clicking here.
Not as bad as it could have been, but still not good
The Australian Government released exposure draft legislation in September for the new Australian Domestic Gas Reservation Scheme. The parameters of the scheme were revised In favour of LNG exporters compared to what was initially proposed.
However, the scheme still obliges LNG producers to sell gas rather than offer gas for sale and aims to ensure that supply in the domestic market is equivalent to 110% of demand, which is what the government terms a modest oversupply. These two factors alone make the national scheme significantly more onerous than the WA reservation, which is often held up as an example of a successful reservation scheme. The WA scheme does not require forced sale of reserved volumes and does not target a particular level of supply, although it is the case that WA’s potential supply has been more than 110% of demand for most of the past decade.
The impact of the forced sale and oversupply provisions is a significant negative for new investment in east coast gas supply. One way to illustrate this point is to consider the purpose of the Australian Energy Market Operator’s (AEMO’s) Gas Statement of Opportunities (GSOO). Under the heading ‘Important Information’ on page 2 of the GSOO, AEMO says: “The purpose of this publication is to provide information to assist registered participants and other persons in making informed decisions about investment in pipeline capacity and other aspects of the natural gas industry.”
What the GSOO seeks to do is indicate to potential investors when they should invest and the scale of new supply needed. The reason that shortfalls have yet to eventuate in the east coast market is, in part, that investment in increasing supply has occurred. The GSOO has fulfilled its mission in that respect.
The reservation fundamentally changes this dynamic. The scheme seeks to ensure supply is 110% of demand through the forced sale of gas produced by LNG exporters so, presumably, the next GSOO won’t forecast any shortfalls and will instead quantify how much LNG feedstock will be diverted to the domestic market to plug any shortfall that may otherwise have existed.
A potential investor in new east coast gas supply, and there are many companies in that category, now doesn’t necessarily have a market window to supply into as there won’t be a shortfall.
What, therefore, should an ‘informed investor’ do in this circumstance? Prices are likely to be lower, shortfalls are no longer a market opportunity for domestic-only producers, and the government has shown a propensity for intervening in the domestic gas market on a regular basis. In our view, an informed investor is now significantly more likely to take their investment to somewhere where their capital is wanted and made to feel welcome, which is not a description of the current Australian east coast market.
Monthly LNG statistical summary
Based on shipping data, EnergyQuest estimates that Australia exported 7.10 Mt of LNG in August, totalling 102 cargoes. This was almost identical to July when exports totalled 7.12 Mt from 102 cargoes. When annualised, August’s exports represent 83.6 Mtpa, equivalent to 97.2% of Australia’s total nameplate capacity of 86.0 Mtpa.
EnergyQuest estimates Australian LNG export revenue of $6.78 billion in August – up by $0.63 billion (+10%) from $6.15 billion in July.
The August result was higher, up by $1.77 billion (+35%) from July 2025’s $5.01 billion. This was due to higher average prices along with higher volumes, which were up by 0.79 Mt (+13%), as total exports during August 2025 were 6.31 Mt.
Combined, the five WA projects (NWS, Pluto, Gorgon, Prelude, and Wheatstone) shipped 56 cargoes totalling 3.97 Mt of LNG during August, one cargo for 0.10 Mt less than they exported during July, when they shipped 57 cargoes for 4.07 Mt. The August result was up by three cargoes for 0.24 Mt compared to August 2025 when they shipped 53 cargoes for 3.73 Mt.
The NT shipped 16 cargoes for 1.18 Mt during August – up compared to the 14 cargoes for 1.05 Mt it shipped during July and up by seven cargoes and 0.54 Mt on the nine cargoes Ichthys shipped for 0.64 Mt during August 2025, when Darwin LNG was not operational.
The three Queensland projects shipped 30 cargoes for 1.95 Mt in August, one cargo less for 0.04 Mt compared to the projects shipping 31 cargoes for 1.99 Mt during July and three the same as the 30 cargoes for 1.94 Mt they shipped in August 2025.