This veto could cost Pluto operator Woodside hundreds of millions of dollars, threatening a project that the company says is already endangered by the Western Australian government's gas reservations policy.

The Australian newspaper today reported that Woodside had proposed to have the Burrup site in Western Australia declared an open access facility and to finance a sixth gas-processing train.

The move would involve an investment of $20 billion and would let Pluto gas be processed along with gas from existing NWS reservoirs.

The plan would have saved Woodside hundreds of millions of dollars because it would not need a greenfields site, which would cost $6.6 billion, from the existing plant.

Given high steel prices and the current tight labour and contracting market, it is also unlikely that Pluto, Gorgon and further North West Shelf and Darwin LNG expansions could be built at the same time.

The other NWS export phase partners, BHP Billiton, BP, Chevron, Shell and the Mitsubishi-Mitsui joint venture, Japan Australia LNG, are thought to have rejected the plan because they are competitors for international LNG sales, according to the Australian.

Woodside owns 100% of the Pluto reservoir, 190km northwest of Karratha, and is eager to commercialise it as soon as possible.

It has been fast-tracking the development of an onshore LNG development on the Pluto gas field, which was discovered in April 2005. The field is estimated to contain over 4 trillion cubic feet of gas.

Woodside aims to sell an initial 4 million tonnes of LNG from Pluto per year.

Gas reservations threaten Pluto: Woodside

The company is still in talks with WA Premier Alan Carpenter over demands it put aside 15% of Pluto reserves to meet future domestic gas needs.

The Australian reported that Woodside is considering an independent arbitrator to determine if domestic gas supply is commercially viable for Pluto.

But it is understood Woodside believes Pluto is not viable as an LNG project if part of the reservoir is barred from export LNG.