Santos (ASX:STO) Chief Executive Kevin Gallagher said regulations in Australia should improve gas supply by incentivizing investment in new sources, noting that new investment is essential from 2030 to offset declining Bass Strait production.

In a speech to the National Press Club, Gallagher said the company welcomes the proposed domestic gas reservation policy, but it should not force supply into an oversupplied market, and instead should allow the gas market to invest in bringing new supply online via price signals.

Santos suggested that the "must sell" provision be replaced with "must offer on commercial terms."

East coast gas supply issues were caused by moratoriums and bans in New South Wales and Victoria over the last 15 years, which led to not enough investment in new gas supply sources in the region, Gallagher added.

Australia's Department of Climate Change, Energy, the Environment and Water did not immediately respond to a request for comment from MT Newswires.

The company's shares rose 2% in recent trading on Wednesday.