The domestic gas reservation scheme announced by the Australian government was "not as bad as it could have been," and it will introduce lower gas volumes into the domestic gas market than expected, RBC Capital Markets said in a Thursday note.

The domestic gas reservation obligation requires a liquefied natural gas export license holder to supply a minimum total quantity of natural gas in a domestic gas market, equivalent to 20% of the LNG exported by the license holder from the market during the period. They may also meet the domestic supply obligation by supplying at least 90% of their minimum total quantity for a specific period, subject to certain requirements related to the remaining portion.

RBC said it didn't agree with the government's estimate that LNG exporters could provide up to 200 petajoules of additional gas per year, because it assumed any spare volumes of gas in the East Coast LNG projects were exported as spot LNG, and not as domestic gas sales.

The domestic gas reservation scheme's 20% requirement is net of existing LNG export license holders' contractual sales, infrastructure limitations, and existing gas reservation. This would be welcome relief for smaller cap Australian domestic gas focused stocks, such as Amplitude Energy (ASX:AEL), Beach Energy (ASX:BPT), Comet Ridge (ASX:COI), Strike Energy (ASX:STX), and Tamboran Resources (ASX:TBN).