Jennifer Hewett And Jane Counsel – Woodside is caught in another hot debate. A year ago, the hot political issue facing Clare Martin was her promise to end mandatory sentencing for juveniles. That was if Labor won government in the Northern Territory. Not that anyone expected it to least of all Clare Martin herself.

These days the Territory's chief minister is instead tackling the major oil companies with an aggression that would do Professor Allan Fels proud. This will be a much tougher battle to fight let alone win even if she is proudly waving the national-interest flag as she wades into the fray.

The full-page ads taken out by the NT Government last week reflected the mood of defiance. In an open letter to the shareholders of Woodside Petroleum, Ms Martin reminded them of the way the company was only saved from a full Shell takeover last year after the Federal Government intervened in "the national interest".

"Australians were convinced that Woodside in Australian control would be more likely than a foreign company to develop Australian resources in a way that would maximise benefits for Australia," she wrote.

Now, Ms Martin is insisting, Woodside is failing the first big test of this commitment the development of the large Sunrise gas fields in the Timor Sea.

The basic issue is whether the majority partners in the project, Shell and Woodside, should be permitted to do what they want have a giant floating liquefied natural gas (LNG) plant hundreds of kilometres out at sea and ship the gas off to US markets without ever coming near Australian soil.

A floating LNG plant has never been built anywhere in the world before, but if it works it will presumably be the first of many. In some ways, this is an extension of the old argument about Australia being the quarry for multinational companies which simply mined the nation's natural resources and shipped them off.

Ms Martin argues that Australia would benefit much more if the Sunrise gas is taken to Darwin and processed there. In marketing terms, it comes down to saying there is a broader community interest at stake than just getting the best financial returns for company shareholders.

And she is determined to try to force the issue politically another reason why she was rushing all over Sydney and Melbourne last week trying to talk national interest to anyone who would listen. The mantra is more jobs for Australians, more contracts for Australian businesses, more energy for Australia and more wealth for the country.

Not only that, Ms Martin is backed by one of the other major US oil companies in Sunrise, Phillips Petroleum, which has 30 per cent of the project. But it's not quite that simple.

"She's bumped right into the international world of oil and gas power politics," say one industry insider. And that world is more cutthroat and manipulative than anything Australian politics could ever dream up. One problem is that Shell and Phillips have far bigger interests at stake than the Sunrise gas field certainly more than any concept of the Australian national interest. After all, they have a combined market value of more than $US250 billion ($463 billion).

Instead, the real focus of the two oil majors is the North American market, where both are positioning to grab dominant stakes in an ever-expanding gas market.

Shell claims that a floating plant at Sunrise will shave $2 billion from costs which it can then use to create a cheaper, more competitive product and build a new market on the US West Coast. What's more, Shell insists that Australia has no such commercial domestic customers for the gas and that a supply without a viable market simply won't be developed.

Phillips has been quieter publicly, but told the Herald its proposal was less risky and would generate greater benefits for all involved.

"We believe the markets right now are better in Australia," said the company's Darwin area manager, Blair Murphy.

"We believe we can get longer term gas contracts here rather than take the risk of the spot LNG market in the US." Phillips is already acutely aware of the risks. The squabbling has already cost the company the $20 billion letter of intent it signed with US-based utility El Paso to take gas from its onshore LNG facility.

One view is that Phillips is using this argument to bluff Shell into doing deals in the West Coast gas market without any real intention of developing the field onshore, no matter what it says to Ms Martin. The other view is that Shell is simply trying to knock Phillips off.

Woodside Energy is reluctant to make any detailed comment on the issue, partly because of the political sensitivity about its own background. "The market will determine the most optimal way to exploit this field," spokesman Nigel Grazia said.

Of course, Shell also still happens to own just over one-third of Woodside despite the political fracas between the two over Shell's proposed takeover last year. It has been a tricky management relationship.

Initially, Woodside backed the Phillips plan to bring the gas onshore in a pipe that was also connected to Bayu Undan, another large gas field in the area being developed by Phillips.

The plan was for the gas to be used to supply the NT industrial market and also be fed into the national grid at Moomba as demand grew. The later stages of the project would see LNG developed for export to Japan.

That was until Shell chose the middle of the NT election campaign 10 months ago to say that its radical new-technology proposal was the only viable option financially.

Woodside has since switched to support the Shell view, along with the other 10 per cent minority partner, Osaka Gas.

With everyone citing different figures, it's impossible to be precise about what the real difference in costs will be. The vagueness is hardly surprising.

The technology is not proven, the market is not yet signed up, the price of gas in a few years' time is unpredictable and the tax regime for the project is uncertain.

That is one area where the Federal Government's attitude would be crucial. Ms Martin would like tax concessions or other assistance from Canberra that would make it more financially attractive to process the gas onshore.

Peter Costello and John Howard would be unwilling partners, particularly given the likely cost of the exercise.

The cynical view in the market is that eventually Phillips and Shell will do a deal to carve up the North American market and that will involve a floating LNG plant, no matter what Ms Martin says.

"She'll put herself in a political dead end supporting a financial project that won't go ahead," says another observer.

The real risk is that the longer the argument goes on, the less viable the domestic option will become for Phillips.

It's a chicken and egg argument. Big industrial projects won't commit to the area without a certainty of supply and the supply can't be developed until the customers are committed.

Canadian-based Methanex has already scrapped Darwin as its site for a $3 billion methanol plant in favour of the Burrup Peninsula in Western Australia.

Also, there are several alternative sources of gas, such as the $6.8 billion Papua New Guinea to Queensland pipeline, all jostling for a slice of the growing eastern states market.

Ms Martin isn't so easily dissuaded. After all, Darwin is now celebrating the building of what was always considered another hopelessly overpriced, impractical economic mirage the Darwin to Alice Springs railway.

Unfortunately, that took decades of political pain and disappointment before it was achieved.