The Prime Minister, Mr John Howard, has rejected a plea from the NT government heavyweights that the Federal Government insist gas from the Sunrise Field be brought onshore to be processed in Darwin.

The latest blow to NT's ambitions came after the PM met with executives from the Timor Sea joint venture and said it was not the government's role to intervene in commercial decisions.

Shell proposes a world first floating LNG plant that has been endorsed by Woodside while American giant, Phillips Petroleum, favours a Darwin-based onshore facility. Shell said its proposal would save about $2 billion in capital expenditure and be 40 per cent cheaper than the Phillip's alternative.

Woodside is convinced that the floating LNG was cheaper to build, less affected by price volatility and is more capable of meeting market changes. Woodside and Shell said they were close to an agreement on Shell's proposal.