‘Deep concerns’: Labor gas plan triggers alarm in Asia

Labor’s plan to hold back more gas exports for domestic use is threatening to strain critical trade relationships in Asia, just as Australia seeks priority access to the region’s dwindling petrol and diesel supplies amid a global fuel crunch.

Major buyers of liquefied natural gas in Japan, Korea and Malaysia have been pressing their Australian suppliers for urgent answers about the scope of looming federal gas-reservation rules, many of which remain unclear. Their concerns were being elevated through official diplomatic channels to the Department of Foreign Affairs and Trade, according to industry sources familiar with the matter.

Under the new government scheme from July next year, LNG shippers will be required to hold back the equivalent of up to 20 per cent of what they export each year and ensure it is sold into the domestic market.

The policy is in response to long-held concerns that excessive LNG exports from Queensland are leaving local households and factories more exposed to the risk of gas shortfalls and high prices.

Despite Australia’s position as one of the world’s biggest gas exporters, regulators warn supplies in Victoria, NSW and South Australia will drop dangerously low before 2030, as ageing Bass Strait production fields deplete without sufficient new local drilling programs to replace them.

However, the market intervention has raised alarm for some of Australia’s most important trading partners at a sensitive time. The federal government has recently used Australia’s reputation as a reliable LNG partner to negotiate priority access to key Asian oil refineries’ petrol and diesel shipments, which are in increasingly short supply due to the Iran war closing the Strait of Hormuz and choking global oil flows.

Crucially, some of the Australian LNG sector’s biggest customers are also the nation’s primary suppliers of petrol, diesel and jet fuel.

Samantha McCulloch, chief executive of industry body Australian Energy Producers, said the government’s release of the proposed gas-reservation rules and subsequent briefings last week had “only deepened the industry’s serious concerns” that the policy could stifle investment and damage Australia’s international standing if it was not designed carefully.

“Our trade and investment partners, including Japan, South Korea, Malaysia and Singapore, would rightly be concerned about the proposal, which comes just weeks after Prime Minister Anthony Albanese provided assurances that Australia would remain a reliable supplier of LNG,” McCulloch said.

Executives from major energy companies in Asia are uns