Phillips Petroleum caused its partners great consternation this week by announcing it favoured bringing the gas onshore to Darwin for domestic sales. Shell and Woodside said they spent close to $200 million over the past two years attempting to secure domestic gas sales however found that onshore demand was non-existent.

In addition, the prices offered by potential gas customers would not be enough to justify the investment in bringing gas from 4000km offshore.

Under Phillips' plan, gas would be piped from the Sunrise/Troubadour reservoir north of Darwin to shore for industrial and domestic consumption. The gas pipeline would link to the line bringing Bayu-Undan gas onshore for Phillip's LNG plant.

At Woodside's annual meeting in Melbourne, Mr Akehurst hinted the Woodside, Shell and Osaka Gas might proceed ahead with the floating LNG plant without Phillips but would prefer not to do it.

"The competition between Phillips and Shell to deliver gas into California is the crucial factor in how far we go forward with Sunrise," Mr Akehurst said. "In a straightforward comparison between an onshore for Sunrise and an offshore facility, the latter leads to a $2 billion saving in providing the same LNG production for export."

Mr Akehurst said he expected Phillips would eventually recognise the FLNG proposal as a major revenue generator for the Sunrise reserves that would allow Australia to diversify its LNG customer base in the US and secure lucrative long-term contracts.

A Shell spokesman added that Australia stood to gain about $30 billion in export earnings from the FLNG proposal and as a result it was in the national interest.