The Western Australian government has suggested Woodside and its partners may lose their lease over the one-third of Browse gas located in WA waters and has apologised to the traditional indigenous owners of James Price Point.
Premier Colin Barnett said yesterday that the $1.5 billion benefits package negotiated with traditional owners would only be delivered if the Browse joint venture partners were to bring gas onshore for processing at James Price Point, The West Australian reported.
On Friday Woodside announced it would be looking at alternatives for gas processing including offshore floating technologies.
"There won't be the benefits package and I hate to say that, but it's the reality," Mr Barnett said.
"I don't apologise for trying as hard as I could to get this project to occur onshore but I apologise to the Aboriginal people for not succeeding."
In a statement on Friday Woodside said the current onshore development concept no longer meets the company’s commercial requirements for a positive final investment decision.
In response, Barnett has indicated he is prepared to play hardball to ensure gas is processed onshore, underpinning both WA jobs and royalties.
It is estimated that about one-third of Browse gas is located in state waters.
"It should not be assumed that the retention of Commonwealth leases automatically means the same treatment of State leases," Barnett warned.
"We will look at this project - if it goes offshore, if that's what the proponents want - entirely from square one. I'm just making the point and I hope the companies listen, don't assume anything."
The retention lease of the WA gas expires in November 2014.
According to research conducted by the Department of State Development and Citigroup, the onshore processing hub at James Price Point is estimated to deliver the Browse partners a profit margin of 11 per cent versus 13.1 per cent for a floating LNG operation.
"No one's making a loss here," Barnett said.
"If the margin's that narrow, I would have thought the good thing to do for this country would be to sit down and work out how you close that gap."
Barnett said negotiating project-specific agreements with unions would be one way to remove cost uncertainties and construction blowout risks.
He added that floating LNG operations are not without risk citing cyclone related shutdowns and safety concerns.
Acting on behalf of the Indigenous people is Wayne Bergmann who said the $1.5 billion benefits package should be paid regardless of whether the project goes ahead or not.
Bergmann who negotiated the deal with Woodside and the government stated that the Goolarabooloo and Jabirr Jabirr people struck the deal under the threat of compulsory land resumption.
Opposition Leader Mark McGowan also weighed in on the issue saying the government should hold up its end of the deal if it goes ahead with the land acquisition.
Regarding the acquisition Barnett said a decision would not be made until a Federal environmental approval decision and formal final investment decision by the joint venture partners were made.
Australian Mining yesterday reported that Woodside has already paid $3.7 million to Aboriginal organisations as part of the agreement.
"We will sit down and review the agreement in line with our next steps in the evaluation of the Browse resources," a Woodside spokeswoman said.