The Morrison government is formally examining a nationwide gas reservation scheme to protect domestic supply and lower prices.

Resources Minister Matt Canavan argued this morning supply had to be stable and prices low. He also hit out at state governments which he said restricted supply, such as Victoria which has banned fracking.

A policy exists in Western Australia where 15 per cent of gas from new projects goes to domestic consumers.

Labor’s Jason Clare also argued more gas was needed and that affordability for manufacturers is essential. However, he said Labor would wait to see a formal proposal before supporting it.

Manufacturing Australia released a statement supporting the announcement. It argued manufacturers paid 150 per cent more than a decade ago and prices had to go down.

“If we want to power a resurgence in Australian manufacturing…there is no more important task than reforming the domestic gas market,” it said.

The gas industry isn’t happy

But the Australian Petroleum Production and Exploration Association (APPEA) was against radical government action.

APPEA chief executive Andrew McConville accepted that more domestic gas was needed. But he disagreed that measures such as a domestic quota could work.

“Sensible reforms can improve the efficiency of the gas market and its operation,” he said.

“But market interventions can adversely affect confidence in the oil and gas sector and discourage new market entrants and supply diversity.

“We have consistently highlighted that while governments may seek to intervene in markets for political purposes, there should be no illusion that intervention is without costs – not least of which that sovereign risk can adversely affect confidence in the sector.

“The best way to put downward pressure on gas prices remains more gas supply. Eastern Australian gas users have paid a high price for unnecessary, unscientific restrictions on gas development in Victoria, New South Wales and, until recently, the Northern Territory.

“Removing these restrictions is the best way to ensure sustained gas supply.

“Some of the measures flagged in the Government’s announcement today could bring increases in supply, but unless significant new supply can be brought to market, they may fall flat.”