ADELAIDE - Australian Energy Producers (AEP) chairperson Cecile Wake said on Tuesday that the government's gas market review falls short of its objective to boost supply.

"We must avoid the 'false choice' between a well-supplied domestic gas market and a strong liquefied natural gas (LNG) industry," Wake said at the AEP conference in Adelaide.

The review, first announced in December, led to a decision this month requiring energy exporters to reserve 20% of their natural gas for Australia's east coast domestic markets.

Wake is also the country chair of Shell Australia, one of three liquefied natural gas exporters in Queensland that will be hit by the reservation policy.

Members of the industry have complained that many details remain unclear, including whether gas markets not physically connected to the east coast market are captured under the reservation scheme. Western Australia has its own 15% domestic gas reservation policy.

The scheme will apply from July next year and not affect existing contracts, the government said. At the same time, it ruled out a 25% windfall tax on gas exports.

The east coast may run short of gas by the end of the decade according to figures from the Australian Energy Market Operator.

Speaking on a panel, Wake said all producers agreed that the reservation policy could lead to oversupply that would push down prices and ultimately discourage investment in new gas exploration and development.

“It will really reduce the trust that regional trade partners have in how serious the government is when it says Australia is going to be a secure, reliable partner to those countries in the region,” she said.

Australia has unveiled a series of deals to ensure supplies of refined products and crude oil to Australia after the closure
 f the Strait of Hormuz with its largest LNG import partners.

Santos CEO Kevin Gallagher, whose company operates the Gladstone LNG project in Queensland and is the only one of the three exporters to source third-party gas, said lower prices could “kill companies.”

That needs to be thought through very, very carefully,” he said.

Assistant Minister for Resources Anthony Chisholm said the government's planned consultation with the industry in the coming weeks and the Labor Party was “committed to consultation."