CNOOC signed a preliminary agreement with the project partners - Chevron, Shell Australia and ExxonMobil - in October 2003.

There had been speculation that in beating CNOOC to take over Unocal, Chevron had prompted CNOOC to decide to pull out of Gorgon talks.

But Chinese newspaper, The Standard, reports that CNOOC sources say the two parties are still negotiating.

Gorgon spokesman Scott Walker told EnergyReview.net that talks had not been suspended, but pricing and the scheduling of gas delivery - Gorgon will not produce its first LNG before 2010 - were still waiting to be resolved.

While CNOOC has baulked at Gorgon's pricing structure, a source from the company acknowledged that LNG was becoming a seller's market, The Standard said.

So far Gorgon has only one firm contract - a deal for 2.5 million tonnes a year with the Energia Costa Azul terminal in Mexico.

But Walker said the consortium was confident it would seal more contracts.

"We are still negotiating with CNOOC and are also targeting the Japanese and Korean markets," he said.

Back in Western Australia, Gorgon has released its environmental management plan.

Western Australia’s Environmental Protection Authority (EPA) has opposed the choice of Barrow Island – a class-A nature reserve – as the facility’s location, and environmental groups have expressed concern over the proposed geosequestration system.

Environmentalists have criticised Gorgon’s plan to bury waste carbon dioxide gas two kilometres below the surface to offset greenhouse gas emissions, because they claim the technology is untested and they are concerned it could leak out.

But the project has already received in-principle approval from both major parties in state parliament through a 2003 Act of Parliament that lets Gorgon use up to 300ha of the island.

Recognising this bipartisan support, the EPA recommended that if the project was allowed to go ahead, Gorgon should put forward a detailed environmental management plan.

Gorgon's recently released environmental impact statement (EIS) addresses two main issues: quarantining Barrow Island from the introduction of plants and animals from outside and the disposal of carbon dioxide, which makes up 14% of the gas.

The EIS claimed independent analysis showed Gorgon would be among the world’s most greenhouse efficient LNG projects. But the Conservation Council of Western Australia said Gorgon had failed to detail how the carbon sequestration process would work.

Conservationists said the technology had not been proven to work in the long term, and there were risks the carbon dioxide could leak out.

But the Gorgon EIS concluded that the risk of the gas migrating to the surface was remote.