The project would initially produce just 500,000 tonnes of liquefied natural gas per annum, but could be relatively easily expanded in a modular way, according to Sunshine.

The joint venture has solicited multiple feasibility studies for the engineering, procurement and construction of an LNG facility at Fisherman's Landing Wharf in Gladstone, Sunshine said yesterday in its quarterly report.

"Selection of an EPC contractor is expected in the June quarter which will trigger the commencement of a formal front-end engineering design study," the company said.

The project remains on track for a final investment decision by December 2008 and first delivery in early 2012, according to managing director Tony Gilby.

"We firmly believe the Sun LNG project is highly competitive due to its modest scale, our access to available gas reserves and the quality of our partners," he said.

Initial geotechnical survey work including drilling and soil sampling was undertaken during the first quarter of this year, and this information has been used in LNG tank foundation design and plant location, Sunshine said.

Fisherman's Landing Wharf has been nominated by the Gladstone Port Corporation as a preferred LNG site.

Situated on reclaimed land, it is 5km from the Queensland Gas Pipeline's Gladstone City Gate. A pipeline survey license for the required 5km feed gas pipeline has been lodged with the Department of Mines and Energy and has been granted ‘environmental authority'.

Sunshine began a voluntary environmental impact statement (EIS) study in December 2007 using sub-consultants engaged under environmental consulting firm RLMS.

An Environment Protection and Biodiversity Conservation Act referral lodged with the federal Department of Environment elicited a subsequent decision from the department that the proposed LNG plant was "not a controlled action", according to Sunshine.

"Risk assessment studies continued during the quarter with globally recognised risk consultants working with relevant government authorities," the company said. "This information is being run in conjunction with EIS studies."

Sunshine Gas is also working to complete Phase 1 of the Lacerta CSM field development program.

The $69 million Phase I program includes construction of a 30 petajoule per annum gas processing and dehydration plant, 8PJ per annum of compression capacity and the establishment of a further 40 production wells.

Additional compression units will be built into the plant as the field output grows, according to Sunshine.

"Work on the Lacerta processing plant started with the recent appointment of GHD and Delco Australia as the FEED contractors," the company said.

"The drilling program will begin this quarter resulting in further reserve upgrades once sufficient new data has been accumulated."

Sunshine has also begun dewatering additional pilot wells that were drilled in part to test the productivity of the Lacerta field using an alternative completion technique.

"This new completion technique is aimed at optimising well performance before moving to full field development," Sunshine said.

"Final well design will incorporate results of production data ascertained from newly completed pilot wells. Further reserve assessment will occur once sufficient new data has been accumulated."