Santos Ltd (ASX: STO) shares are pushing higher on Tuesday as attention returns to Australia's gas market.
At the time of writing, the Santos share price is up 1.19% to $7.23.
That gives the ASX 200 energy stock some relief after a softer month. Santos shares are still down around 7% over that period, although they remain almost 20% higher since the start of 2026.
Here's what is happening.
Santos hits back at gas demands
According to reports, Santos has pushed back against calls from manufacturers for cheaper domestic gas.
The debate appears to be focused on demands for gas below $10 a gigajoule, as Labor weighs up a domestic gas reservation policy for the east coast.
Under the policy, some gas that would normally be exported could be kept in Australia for local users.
But manufacturing groups want cheaper gas to help bring down their costs. They also want fewer exemptions for gas producers.
However, LNG exporters argue they shouldn't be forced to sell gas at prices that don't cover their costs.
Santos Chief Executive, Kevin Gallagher, has taken a strong position on the issue.
He reportedly warned that boards could face problems if they signed gas deals that failed to cover costs.
What's at stake for Santos
Despite the heated debate, this isn't just about Santos.
The Albanese Government is trying to get more gas into the local market without putting producers off new investment.
Energy Minister Chris Bowen has been pushing a plan that would keep part of LNG export volumes in Australia for local users.
His aim is to increase supply and help bring prices down.
However, the energy industry has warned that too much government intervention could make companies less willing to spend money on new projects.
And for Santos shareholders, this is the key risk.
If the rules become tougher, the market may take a different view on future gas projects and long-term supply deals.
But if producers can still secure fair commercial prices, Santos may be in a stronger position to keep investing in its domestic gas assets.
What to watch now
Santos has already been active on the domestic gas front.
Just yesterday, the company announced a gas sale agreement with the South Australian Government to supply 200 petajoules of gas over 10 years from 2030.
Santos shares are higher for the moment, which suggests investors are not too worried at this stage.
However, the political risk around gas isn't going away.
The question now is whether Santos can keep supplying the local market without letting policy pressure eat into its returns.
