East Timor turned down Australian-based Woodside, an oil gas producer to export gas from the Timor Sea that would have become the world's first floating liquefied natural gas (LNG) platforms and could have put the multibillion-dollar Greater Sunrise's LNG partnership in jeopardy.

The decision for a refusal came after Woodside and its joint-venture partners, including Conoco Phillips, Shell, and Osaka Gas, discussed its plans to construct a controversial platform. East Timor and Darwin were both prospect areas for an onshore platform.

Agio Pereira, a government spokesperson of East Timor, confirmed last night that a pipeline should be built to deliver gas to East Timor. He said the East Timorese government will also not agree to a floating platform or a pipeline to Darwin.

Last week, Prime Minister Xanana Gusmao said Australia issued warnings to East Timor over its stand and suggested that the best option for a resource project is for an onshore pipeline.

A source familiar to the issue said the East Timor government does not want to be used as a "guinea pig" for the floating LNG plant and will prepare for a battle to "secure the maximum benefit for its economy and people."

An analyst commented that a floating LNG project for Sunrise is unlikely until 2018.

Woodside, along with its partners, revealed yesterday that a floating LNG plant is considered the best option to develop the big Sunrise gasfields in either Timor Sea, or build an onshore plant at Darwin.

"We expect that the selection of a floating LNG processing option will, in addition to generating significant long-term petroleum revenue, provide a broad range of social investment, employment and training opportunities for Timor-Leste (East Timor)," said Woodside chief executive Don Voelte.

Under the proposal, which is pending for review until 2012, Shell will develop and operate a 480 m long LNG processing shop while Woodside will construct and operate underwater gas wells at Sunrise.

The Greater Sunrise gas fields hold 5.13 trillion cubic feet of gas and represent the Timor Sea joint petroleum development area.

East Timor and Australia will both acquire 50 per cent of the royalties.

The floating LNG project is expected to generate up to 4 million tonnes of LNG a year, along with condensate and LPG.

An LNG floating operation was never tested in the industry.