ABC News cited “sources close to the Gorgon partners” as saying the three companies – Chevron, Shell and Exxon – were arguing over the project’s economic viability amid the latest budget estimate for the giant project planned for north-western Australia.

Earlier this year, the Gorgon JV was understood to have been looking at boosting capacity at the project by 50% as one way to lower production costs.

This could involve building build two trains, each capable of producing 7.5 million tonnes of liquefied natural gas per year, instead of the proposed 5MMt.

Doubts over the viability of Gorgon grew towards the end of last year, after it was revealed the project’s costs had blown out by up to $3 billion.

As a result, operator Chevron, which holds a 50% stake in the project, said it was undertaking a study to try and offset these additional costs.

The report came as Federal Industry Minister Ian Macfarlane launched another attack on the Western Australian Government’s 15% domestic gas reservation policy.

Macfarlane reiterated that the “heavy-handed” regulations would threaten investment in the state.

“The debate about domestic gas in Western Australia is more complicated than the State Government would have people believe. There is no quick fix,” he said.

“Undermining incentives to explore and produce gas is self-defeating – rest assured [Premier Alan] Carpenter’s domestic reservation policy is not going to solve the problem.

“In fact, as his government’s Economic Regulation Authority notes in its latest report, the policy is discouraging producers from offering long-term supply contracts.”

The ERA said last month that the state was likely to have domestic gas supply problems within five to seven years.