What is the new Scheme?

The Scheme is expected to commence on 1 January 2027 and will introduce an export licensing framework administered by the Australian Energy Regulator (AER).

1. Export licensing framework

• All LNG exporters must hold an export licence from 1 January 2028, granted for a period between 20-50 years and regulated by the AER.
• A change in control (set at 20%) of the licence holder will require the Minister's consent to avoid licence suspension and cancellation. The test for a 'change in control' is consistent with an equivalent test under the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth).
• The domestic supply obligation (DSO) will be a condition of the licence. The Minister may suspend or cancel a licence on grounds including reasonable belief of non-compliance with DSO obligations, change of control without consent, and false or misleading information.

2. How the DSO quantity is calculated

• The DSO requires a licence holder to supply a minimum quantity, of up to 20% of the energy equivalent of their exports, in each 12-month period. This 20% (or a Ministerially varied lower percentage) acts as a ceiling on the individual licence holder's DSO.
• Separately, for each year the AER calibrates a market-wide target designed to achieve approximately 110% of forecast domestic demand (a 10% oversupply buffer, with the buffer reducible by the Minister to as low as 0%). Each licence holder's share of this calibrated target is then compared to their DSO (up to 20%) ceiling, and whichever is lower applies as their actual minimum DSO total quantity for that exporter for that year. 
• Both the (up to) 20% ceiling and the market calibrated target may be adjusted by the Minister to account for a licence holder's pre-existing contracts, infrastructure constraints and existing State reservation arrangements.

3. Two physical domestic markets

DSOs apply for the two physical domestic gas markets – the east coast and Northern Territory market (supplied by east coast and NT exporters) and the Western Australian market (supplied by WA exporters). 

4. Flexibility, levies, assurance and shortfalls

• There will be limited flexibility where licence holders may defer up to 10% (subject to a three year carry forward limitation), but only where they meet the flexibility requirements to be prescribed in the Competition and Consumer (Gas Market Code) Regulations 2023 (Cth) (Gas Market Code).
• Licence holders will be required to pay a cost recovery levy on their export licences to fund the administration, compliance and enforcement of the Scheme.
• Licence holders will also be required to maintain sufficient financial assurance to meet the costs, expenses and liabilities arising from complying (or failing to comply) with their obligations under the Scheme, including their DSO.
• The Scheme also addresses how a DSO can be met where a licence holder cannot cover its obligation entirely from its own gas. Licence holders can meet the shortfall through a third-party 'supplying entity' (such as an upstream producer) contracted to deliver gas on their behalf, or via gas that qualifies as 'additional' to the domestic market.

How are the existing arrangements expected to change?

1. Repeal, retention and a higher bar

• The Australian Domestic Gas Security Mechanism (ADGSM) in the Customs (Prohibited Exports) Regulations 1958 (Cth) will be repealed.
• The Gas Market Code will be retained and will become the key legal instrument to operationalise the DSO.
• The Scheme requires actual physical supply of the minimum total quantity, not merely an offer to supply, which is a materially higher bar than the existing Gas Market Code.

2. Price regulation phased out

Existing price regulation is expected to be phased out - the current price cap under the Gas Market Code (the reasonable price provision) and its related ministerial exemption framework are proposed to be repealed.

The Scheme is intended to operate in parallel with the national gas market regulatory framework – the AER's export licensing role sits alongside its economic regulatory and enforcement functions under the National Gas Law and similarly information disclosure will be required through AEMO's Gas Bulletin Board.

3. Ongoing compliance obligations

Compliance risk and enforcement action will materially increase with an expanded and increased role by the AER. For each 12-month period, a licence holder must have a compliance plan accepted by the AER and submit an annual compliance report. Otherwise ongoing obligations include maintaining financial assurance and notifying changes in circumstances, including changes in control.

4. Enforcement powers and penalties

The amendments also trigger the Regulatory Powers (Standard Provisions) Act 2014 (Cth) for monitoring, investigation, civil penalties, enforceable undertakings and injunctions.

Contravention of the DSO exposes body corporate licence holders to civil penalties. The maximum penalty (based on the current value of a penalty unit) is significant - the greater of $18,200,000, three times the benefit obtained or detriment avoided, or 10% of annual turnover (capped at $910,000,000). Executive officers may also be personally liable.  

Anti-avoidance provisions apply to schemes designed to avoid or reduce DSO obligations.

How to prepare

1. Make a submission

Consultation on the Exposure Draft closes on 24 September 2026 – consider how the Exposure Draft impacts your business and make submissions to ensure a workable Scheme is implemented.

2. Model your exposure

Undertake forecasting and/or model forward-looking export and domestic gas volumes to assess exposure.

3. Review wider systems

Reforms will have wide reaching impacts not limited to contracting terms and volumes – marketing practices, enterprise risk management frameworks and approvals processes are some of the systems that will require reviews and amendments.

4. Audit existing contracts

Current and future contracts will be impacted – an audit of existing contracts referencing the Gas Market Code, the ADGSM or other instruments will be required given the package will amend or repeal those instruments.

5. Build compliance systems

Compliance and enforcement systems will need to be expanded or established to manage compliance and reporting.

6. Assess how the scheme applies

LNG exporters, including individual joint venture partners, will need to assess how the Scheme applies to their operations, plan their export licence applications, confirm treatment of pre-existing contracts, review change-in-control governance, and build the systems needed for compliance and reporting.

Timeline and key dates

From the Gas Market Review report to full commencement of the export licensing requirement.

The proposed reforms could have significant operational, commercial and compliance implications for LNG exporters and gas market participants. Speak to us about assessing your exposure and preparing for the potential changes.