Adelaide, May 11, 2026, 06:34 ACST
Santos Limited (ASX: STO) opened the week under scrutiny, as investors sized up the company’s LNG ambitions against fresh domestic policy headwinds. Shares last changed hands at A$7.52, marking a 1.44% dip before Friday’s close in Sydney. LNG refers to natural gas cooled to liquid for easier transport by tanker.
Canberra’s domestic gas reservation plan is front and center. Starting July 1, 2027, exporters will be required to direct an amount of gas equal to 20% of their exports into the Australian market, according to the government. Contracts secured before Dec. 22, 2025, won’t be affected.
Santos’ stake in the Gladstone LNG, or GLNG, project in Queensland is in the spotlight here. According to ABC, GLNG isn’t supplying gas to Australia right now; instead, it’s sourcing from the domestic market to fulfill export deals with Malaysia and South Korea. Meanwhile, Shell-backed QCLNG and Origin Energy’s APLNG are already covering close to 40% of east-coast gas demand with uncontracted supply.
The policy fight is drawing in the majors too. Woodside Energy wants Canberra to allow more leeway in the gas reservation rules, according to The Australian—a clear indication that the sector is stepping up pressure over whether rigid yearly targets could disrupt long-term project returns.
Analysts aren’t mincing words. Go Katayama at Kpler flagged that a “meaningful volume” of Australia’s LNG contracts runs out between 2027 and 2029. Saul Kavonic from MST Marquee described the policy as a “surprise political announcement.” Over at Rystad Energy, Masanori Odaka added that it could dampen Australian LNG supply growth, just as supply remains uncertain globally. Reuters
Santos is counting on fresh output to tilt its earnings profile. During the AGM, CEO Kevin Gallagher told investors the Barossa and Pikka teams are “laser focused” on getting to steady-state and then plateau production. The two projects, he said, should boost total production by 25% to 30% by 2027.
These projects aren’t a sideshow. Back in April, Reuters said Santos stuck with its 101 million to 111 million barrels of oil equivalent full-year production and sales target, even after pulling in $1.27 billion in first-quarter sales revenue. Kavonic told Reuters investors were already “looking through the revenue miss” and focusing on the Barossa and Pikka launches. Reuters
The outlook isn’t straightforward. Argus flagged a big unknown: how much fresh gas will actually hit the domestic market next year isn’t nailed down yet. Australian Energy Producers, representing the industry, claims the 20% rule risks squeezing out smaller local players. Beach Energy’s view: the proposal could scare off future investment. That leaves Santos juggling three variables—whatever the final policy looks like, the schedule for legacy contract roll-offs, and the pace at which Barossa and Pikka might scale to cover any possible GLNG squeeze.
