The plant will be used by Shell and its partners to process Timor Sea gas.

Shell said the floating plant, which is the size of a 300,000 tonne tanker, is considerably cheaper than the alternative Phillips Petroleum proposal which envisaged a land-based LNG facility to be based in Darwin. IHI officials were not available for comment.

In keeping with Japan's strategy of becoming less reliant on Mid-East oil supplies, Japan National Oil Corp this week signed an agreement with Mexican state oil firm, Petroleos Mexicanos (Pemex), to continue to study the Chicontepec Basin which is estimated to have potential reserves of about 100 billion barrels of crude.

Japan's diversification strategy scored a major success during the holiday period in Australia with a Mitsui subsidiary, Wandoo Petroleum, participating in the Cliff Head oil strike off the WA coast. The field is expected to have in place about 70 million barrels of oil with estimates that 50 per cent is recoverable.

Japan is also taking steps to diversify its energy supply with Tokyo city government officials planning to build windmills on its waterfront. The officials said the facilities would generate enough energy to supply about 1000 households. About $2 billion is earmarked in Australia for the development of wind generated power stations in Victoria and South Australia.