Gas reservation policy design critical as conflict hits global supplies in Oil & Companies News 26/03/2026 With global gas supplies now caught in the crossfire of the Iran conflict, the economic implications for Australia could be far wider than escalating oil prices and shortages. Overnight, missiles struck major gas and liquefied natural gas (LNG) processing facilities in Iran and Qatar, which share the world’s largest gas reserve, the South Pars/North Dome field that spans the Persian Gulf. Like oil, almost 20% of the world’s LNG supply must transit the Strait of Hormuz, where 20% of the world’s oil supplies are stranded. With global LNG supply near capacity, and unable to replace lost supply from the Middle East, LNG prices have almost doubled in Europe and Asia since the conflict began. In Australia, this unfolding crisis adds a further layer of complexity and urgency for a government already grappling with how to rein in domestic gas prices – and an opportunity. This is because Australia, as one of the world’s largest LNG exporters, has become intrinsically linked to global LNG market dynamics. This is particularly evident in eastern Australia, where domestic gas prices have tripled in the decade since LNG exports began. A decade of reactive policy measures by the federal government has only increased regulatory uncertainty for the gas industry and failed to eliminate the risk of imminent gas shortfalls. To address these issues, the government is designing a new regulatory framework, including a gas reservation scheme that will apply from next year. If not designed appropriately, it risks creating further energy security problems across Australia, rather than resolving them. A reservation scheme must apply nationally While the government’s proposed reservation scheme has been motivated by conditions in eastern Australia, both eastern and Western Australia (WA) face longer-term energy security risks because LNG exporters are not required to supply gas domestically when it is needed. The Australian Energy Market Operator forecasts gas shortfalls by 2030 despite WA already having a reservation policy. There, LNG exporters are required to supply 15% of reserves domestically, but have complete flexibility over when they supply that gas. When domestic prices are lower than LNG prices (as in recent years), exporters have strong financial incentives to delay domestic supply to reduce the net present financial cost of selling into the lower-price domestic market. This is why WA LNG exporters remain well behind on their obligations, with only 8% of gas production supplied domestically by 2023. Other risks associated with delaying domestic supply, include reserve downgrades (which would lower future domestic supply obligations) and the potential for LNG projects to become financially unviable. As a result, exporters could fail to meet their domestic supply obligations, such as Woodside’s Pluto project, which has supplied just 6% of its required domestic volumes. The prospect of shortfalls in WA when LNG exporters already lag on their domestic supply obligations highlights the inherent limitation of WA’s reservation policy – it is unable to compel domestic supply when it is needed. Therefore, it is crucial the new federal reservation works alongside WA’s policy to ensure the state’s LNG exporters supply gas to the domestic market when it is actually needed, by imposing annual supply obligations. However, a federal scheme is unlikely to requir