In brief
This year’s budget contained measures related to oil and gas, Australian natural resources and critical minerals. This funding is intended to further the Federal Government’s aim to support Australia’s energy market reliability and national energy security.
Key takeaways
The 2026 Federal Budget covers a broad range of commitments by the Federal Government to strengthen Australia’s national energy security. Most significantly, the Federal Budget commits AUD 11.9 billion through the National Fuel Security Plan with the aim of securing Australia’s near-term fuel and fertiliser security. Among its funding allocations are:
- The establishment of a Fuel and Fertiliser Security Facility (AUD 7.5 billion committed) which is intended to increase the domestic supply and storage of fuel and fertiliser by providing financial support including loans, equity, guarantees, insurance and price support; and
- AUD 3.2 billion for the establishment of an Australian Fuel Security Reserve. As part of this initiative, approximately 1 billion litres of fuel will be reserved to increase long term diesel and aviation fuel supply and storage. Along with this reserve, the Minimum Stockholding Obligation (MSO) will increase Australia’s critical fuel reserves from 20–32 days to 50 days. This increase in time is aimed to address potential regional stockouts and supply constraints for essential users, in anticipation of future potential supply disruptions.
Separately, the Federal Budget also commits AUD 35.5 million to be spent over four years from 2026–27 for the establishment of a Domestic Gas Reservation Mechanism. This initiative, which was announced on 7 May 2026, aims to ensure a secure and affordable domestic gas supply through the wholesale gas market, and will commence on 1 July 2027. Funding allocations include:
- AUD 30.6 million to be spent over four years from 2026–27 to develop and implement the Domestic Gas Reservation Mechanism, and for gas market analysis and policy development to promote market reliability and energy security; and
- AUD 4.9 million in 2026–27 to modernise offshore resources regulation, support gas investment and mitigate supply shortfalls.
The Government has also announced targeted investment to support Australia’s domestic critical mineral industry.
In more detail
Fuel security and resilience
Following the Australian Government’s announcement on 6 May 2026 to the same effect, the release of the Federal Budget on 12 May has confirmed that the Government will provide up to AUD 11.9 billion over five years from 2025-26 through the National Fuel Security Plan (“Plan”) to secure Australia’s near-term fuel and fertiliser security.
Although not an exhaustive list, the Plan commits the following funding to various energy security initiatives:
- Approximately AUD 7.5 billion for the establishment of a Fuel and Fertiliser Security Facility. This facility intends to increase the domestic supply and storage of fuel and fertiliser by providing financial support including loans, equity, guarantees, insurance and price support;
- AUD 3.2 billion for the establishment of an Australian Fuel Security Reserve (owned by the Australian Government). Approximately 1 billion litres of fuel will be reserved to increase long term diesel and aviation fuel supply and storage. Along with this reserve, the MSO will increase Australia’s critical fuel reserves from 20–32 days to 50 days. This increase in time is aimed to address potential regional stockouts and supply constraints for essential users, in anticipation of future potential supply disruptions;
- AUD 1 billion for the delivery of the Economic Resilience Program by the National Reconstruction Fund Corporation from 2025–26. This program aims to support freight, fuel, fertiliser and other critical supply chains affected by global market disruptions;
- AUD 10 million to support the development of feasibility studies into new or expanded fuel refining capabilities, which the Australian Government will co-fund with state and territory governments;
- AUD 54.7 million to be spent over five years from 2025–26 (and AUD 8.9 million for each subsequent year thereafter) to support the ongoing administration of Australia’s fuel security framework, including the oversight of the Fuel Security Services Payment, the MSO and the National Fuel Security Plan communications campaign;
- AUD 9.2 million to be spent over two years from 2025–26 (but terminating on December 2026) for the Department of the Prime Minister and Cabinet to establish a Fuel Supply Taskforce to coordinate Australia’s fuel security during disruptions caused by any conflict occurring in the Middle East; and
- AUD 4 million to be spent over three years from 2026–27 for the development of a green fuel bunkering strategy. This funding aims to support the Government’s existing AUD 1.1 billion Cleaner Fuels program.
Domestic gas reservation
The Government will provide AUD 35.5 million to be spent over four years from 2026–27 for the establishment of a Domestic Gas Reservation Mechanism. This initiative, which was announced on 7 May 2026, aims to ensure a secure and affordable domestic gas supply through the wholesale gas market, and will commence on 1 July 2027. Funding allocations include:
- AUD 30.6 million to be spent over four years from 2026–27 to develop and implement the Domestic Gas Reservation Mechanism, and for gas market analysis and policy development to promote market reliability and energy security; and
- AUD 4.9 million in 2026–27 to modernise offshore resources regulation, support gas investment and mitigate supply shortfalls.
The domestic gas reservation percentage will be set at the equivalent of 20% of exports.
Investment in critical minerals
Separately, the Australian Government has committed AUD 173.3 million (to be spent over the course of five years) to support the growth of Australia’s critical minerals industry. This includes funding:
- For the stockpiling of critical minerals;
- To support the operation of the Critical Minerals Strategic Reserve; and
- To support the delivery of Australia’s international critical minerals commitments.
A copy of the Federal Budget papers can be found here.
Fiona Liu, Graduate at Law, has contributed to this legal update.