IN Brief:
- Australia's Domestic Gas Reservation Bill 2026 proposes reserving gas for domestic customers, with exporter obligations calibrated up to 20% of export volumes.
- The Australian Food and Grocery Council estimates that gas supplies approximately 40% of the sector's energy requirements.
- The scheme targets domestic supply equivalent to 110% of forecast demand, but lower manufacturing energy prices have not yet been demonstrated.
The Australian Food and Grocery Council has welcomed the introduction of legislation intended to increase domestic natural gas availability, arguing that more reliable supplies and competitive prices are essential to food and grocery manufacturing.
The organisation responded on 14 October 2026 to the Australian Government’s Domestic Gas Reservation Bill, which proposes new obligations requiring liquefied natural gas exporters to supply a proportion of their production to domestic customers.
According to the council, gas accounts for approximately 40% of the energy used by Australian food and grocery manufacturers. It supports thermal processing operations including cooking, heating, drying and pasteurisation, where changes in fuel cost can directly affect production expenditure.
The proposed scheme is intended to increase the volume of gas offered to domestic users and place downward pressure on wholesale prices. The eventual commercial effect will depend on the legislation enacted, the way the obligations operate and the prices manufacturers can negotiate with suppliers.
The government proposes a reservation requirement calibrated up to 20% of liquefied natural gas exports. The Australian Energy Regulator would determine the appropriate supply obligation using domestic market requirements, with the scheme targeting gas availability equivalent to 110% of forecast demand.
The 20% figure is therefore an upper limit within the proposed arrangement rather than an unconditional obligation applying to every exporter. Existing export commitments receive protection under the government’s framework, while the supply requirements are intended to take effect from January 2028.
Australia’s gas markets also have important geographical differences. Production, export facilities and major industrial customers are distributed unevenly, while pipeline capacity influences whether additional gas can reach the areas where manufacturers require it.
The availability of a greater national gas volume does not necessarily establish an equivalent increase in accessible supply at each factory. Contracting arrangements, transport capacity and regional market conditions remain relevant to the amount industrial users can purchase and the price they pay.
Food manufacturing requires thermal energy across processes that operate at different temperatures and under different production conditions. Gas-fired boilers can generate steam for indirect heating, while other applications use combustion equipment to supply heat directly to ovens, dryers or process air systems.
In pasteurisation, the product must receive an appropriate combination of temperature and holding time to achieve the required treatment. Heat exchangers, flow control and instrumentation help maintain those conditions while allowing production to proceed at a defined rate.
A reliable heat supply is necessary for the process to operate as designed, although energy availability is only one part of food safety control. Temperature monitoring, equipment condition and procedures for responding to deviations must remain effective regardless of the fuel used.
Drying operations present different requirements because removing moisture from an ingredient or finished product can consume substantial quantities of thermal energy. Spray dryers, ovens and other equipment must maintain suitable temperature, airflow and residence time to achieve the required final moisture content.
Changing the fuel price affects the operating cost of these processes, but the scale of the effect depends on equipment efficiency, production volume and the proportion of manufacturing expenditure represented by energy. A drying operation may be more exposed to gas price movements than another facility using relatively little process heat.
Cooking systems, heated mixing vessels and cleaning operations introduce further demand. Steam and hot water systems may serve several production areas, with the required capacity determined by the number of processes operating simultaneously and the temperature and flow needed at each point.
Factories can reduce consumption through insulation, heat recovery, equipment maintenance and suitable process controls. Those measures influence the amount of energy required, while gas market arrangements determine the cost and reliability of the remaining fuel supply.
Australian food producers must therefore consider fuel availability and equipment efficiency as separate operating factors. An improvement in the supply market may reduce purchasing pressure without changing the thermal energy required to manufacture a particular product.
Long-term energy costs also influence capital investment. Manufacturers assessing new production lines, factory extensions or equipment replacement must estimate operating expenditure over the expected life of the assets, rather than relying solely on the fuel price available when the investment is approved.
Volatile gas prices can make these calculations more difficult, particularly where the proposed equipment requires a substantial and continuous thermal input. Fixed-price or otherwise predictable supply arrangements can reduce uncertainty, although their availability and cost depend on market conditions.
Australian Food and Grocery Council chief executive Colm Maguire has called for the legislation to support internationally competitive prices and give manufacturers confidence to make long-term investment decisions. The council also wants industrial customers to be able to secure contracts offering greater certainty.
The industry’s support remains conditional on the scheme producing accessible supply at commercially useful prices. Increasing the gas allocated to the domestic market would not fulfil that objective if infrastructure restrictions or contracting arrangements prevented factories from obtaining it on appropriate terms.
Gas producers have raised concerns about the effect of compulsory supply obligations on investment in new production. A reservation scheme that reduces potential export returns could alter project economics, particularly where proposed developments depend on substantial capital expenditure.
The government has sought to address those concerns through regulator-led calibration and protection for existing export contracts. Its approach aims to balance domestic supply against continuing investment, although the effect on future production has yet to be established.
Electrification may reduce gas requirements in some food processing applications, depending on the temperatures, production schedules and equipment involved. Electric boilers, heat pumps and other technologies have different operating characteristics and require suitable electricity infrastructure.
Other applications may continue using gas because existing equipment has substantial remaining service life or because an alternative heating system does not yet meet the technical and commercial requirements of the process. The appropriate investment decision depends on individual factory circumstances.
Changes in manufacturing technology will consequently influence future gas demand, while the proposed reservation scheme is intended to address supply conditions during the transition. Its commercial value cannot be judged from the amount reserved alone, without considering delivered prices and reliability.
The Domestic Gas Reservation Bill introduces a new legislative stage in Australia’s efforts to secure gas for industrial customers. For food manufacturers, the measurable outcomes will be the quantity available under workable contracts, the cost of supply and the degree of certainty those arrangements provide for production and investment.
