Gas producers have slammed a policy forcing them to sell 20 per cent of their product directly to the domestic market, warning it could hurt future supply, while undermining Australia’s efforts to secure oil from Asian trading partners.

Days after ruling out a new gas tax, the Albanese Government has detailed what it describes as an “historical structural shift” for the Australian east coast market that it claims will put downward pressure on prices.

Under the national reservation policy that comes into effect in July 2027, Queensland’s three main LNG exporters will be required to sell a fifth of any new gas they produce into the domestic market, similar to an existing scheme in Western Australia.

The new measures will apply to spot-market and uncontracted gas but will not affect existing long-term contracts that exporters have with major international buyers, including key Asian trading partners which Australia depends on for fuel supplies.

Energy Minister Chris Bowen declared the reservation policy was “carefully calibrated” to ensure that Australia’s national interest was put first and insisted the new arrangements would put downward pressure on gas prices on the east coast.

“It will ensure a moderate oversupply of Australian gas use, which will ensure downward pressure on prices, but even more importantly provide that certainty of access to Australia’s heavy industry, which needs gas,” he said.

“Australia has been the only gas-exporting country in the world without some form of reservation. That changes under the Albanese government.

“This is Australian gas, so Australians should have ‘first go’ at it.”

“This is an important policy that gets the balance right. It applies to prospective contracts and the spot market. We will not disturb any existing contracts. We have consulted closely and worked closely with trading partners to ensure that it’s well understood.”

Resources Minister Madeleine King, who has previously likened a reservation scheme to a tax, said the “historic” change would ensure the prices Australians pay for local gas were no longer “hostage to international markets”.

During last year’s election Labor derided then Opposition Leader Peter Dutton’s pledge to divert more gas to the Australian market, rather than sell it overseas, describing the idea as popular as a “snake in a sleeping bag”.

Mr Bowen acknowledged Labor’s new policy would have critics but pointed to Western Australia which introduced a 15 per cent domestic gas reservation two decades ago, to promote the merits of its new position.

“This is not going to be uncontroversial, we know that, but look people said the same thing when the Western Australian government introduced their gas reservation policy. People said this will be the end of gas in Western Australia . . . I’m not sure that’s how it turned out in Western Australia and it’s not how it would turn out here,” he said.

“We think those twice-yearly warnings of gas shortages in one of the biggest gas producing countries in the world are a problem. We want to see them go away. This policy makes that go away. That’s a good thing, not a bad thing.”

Further consultation will take place to determine how the new reservation policy will apply to LNG production in the Northern Territory, as well as Western Australian plants already subject to that state’s scheme.

Australian Energy Producers chief executive Samantha McCulloch said the new east coast gas reserve for Queensland LNG exporters would crowd out smaller domestic producers.

“There is no justification for such heavy-handed intervention when the east coast market is currently well supplied and prices are the lowest they’ve been in years, with Australian gas users insulated from the global energy crisis,” she said.

“It also risks undermining our reputation as a reliable trading partner at a time when our LNG exports are critical for regional energy security.

“The Prime Minister has rightly acknowledged the strategic importance of our LNG export relationships for Australia’s liquid fuel security.”

“The gas market review was the opportunity to reset the east coast gas market and restore investor confidence. But today’s announcement ultimately creates more questions than answers.”

Former Western Australia premier Colin Barnett, who oversaw the introduction of a similar scheme in the State in 2008, said concerns about the new east coast gas reservation were unfounded.

“Australia is one of the three big gas exporters, and there are liquefied natural gas projects all around the world. Virtually all of them have some sort of reservation or profit sharing or production sharing arrangement”.

On Thursday a Senate Committee on the Taxation of Gas Resources released its report which failed to reach consensus but included a call from Labor members for more examination of the petroleum resource rent tax to see if it could be tightened.

The Australian Chamber of Commerce and Industry said the policy would have “significant and varied implications” for the business community, offering some immediate price relief, but likely negative impacts in the medium and longer-term.

“Curtailing exports will hurt gas producers and lead to less investment in future gas supply, which in turn puts upward pressure on domestic prices,” ACCI acting chief executive officer David Alexander said.

“Businesses in other export industries will be concerned that this measure establishes a precedent that will entail an extension of export curbs to other industries.”

“If the Government now regards it as economically beneficial to curb exports to supply the domestic market, it opens the way for the principle to be extended to other export industries.”

The Climate Council urged the Government to use the new reservation policy to end gas expansion in Australia arguing that the momentum was “clearly with cleaner, cheaper alternatives”.

“Reservation must be a tool for a managed gas exit, not a lifeline for more drilling,” Climate Council Councillor and energy expert Associate Professor Joel Gilmore said.

“Australia has more than enough to meet our domestic needs, and a reservation policy is proof of that. Right now most of our gas is shipped offshore for profit while Aussie families and businesses pay a high price.”