Due to the high liquefied natural gas (LNG) cost base in Australia, which Royal Dutch Shell has described as the highest in the world, new investments in the LNG sector may be under threat. LNG is considered a sunshine industry for Australia and experts have forecast the country would be the world's largest LNG exporter by 2020.

Besides increasing construction and labour costs, gas executives pointed to green activism and labour shortages as the other major challenges to the industry.

"If we can't keep the prices down and we can't find a way to improve the productivity, onshore LNG plants will become increasingly difficult to build," The Wall Street Journal quoted Shell Australia Chairman Ann Pickard who spoke at the LNG industry conference in Perth on Wednesday.

There are about a dozen large LNG projects in the pipeline in Australia which has strained the labour market and boosted the risk of cost blowouts. One such venture is Shell's Arrow Energy LNG terminal in Queensland which is a joint venture with PetroChina. Shell is also one-fourth owner of the $43-billion Gorgon LNG project of Chevron in Western Australia.

Shell is also constructing its own Prelude floating LNG plant offshore of WA, which Ms Pickard said was on schedule and on budget.

Prior to the conference, Australian businessman Geoffrey Cousins criticised the WA government for pursuing another LNG precinct north of Broome, in spite of environmental concerns raised by green groups.

However, WA Mines Minister Norman Moore dismissed Mr Cousins's opposition. The minister insisted the LNG venture would be a significant development for the Kimberley because of the employment opportunity it would bring to the area.

"This nonsense that it will destroy the Kimberley is just ridiculous; it's just about 5,000 or 6,000 hectares out of an area that is about the size of Victoria," ABC quoted Mr Moore.

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