While both ministers welcomed a new gas supply contract between Santos and Wesfarmers for a WA-based liquefied natural gas plant, each took a different view on what it meant in relation to the state’s gas reservations proposal.

Carpenter told Parliament yesterday that it highlighted the need for gas reservations to ensure other natural gas projects could go ahead in the future.

But a spokesperson for Macfarlane told the West Australian newspaper that the deal showed the market could deliver more gas to domestic customers without intervention.

“It’s obviously a pleasing development in a market that’s been free of government intervention and we hope the Premier takes note,” the spokesperson was quoted as saying.

Carpenter has vigorously defended his plan to reserve 20% of gas produced in the state for the domestic gas market, harshly warning the Federal Government not to interfere with the proposal.

"They can try," he told reporters in Melbourne. "I don't care what the federal government says or what the federal government tries to do, I am not going to let that happen to the Western Australian economy.

"It is my responsibility to make sure that Western Australia has secure gas supplies for the future and if the federal government tries to stop me I will fight them every inch of the way.”

Under the contract with Wesfarmers, Santos will supply up to 37 petajoules of gas to the 175-tonne per day LNG plant for its first 10 years of operations.

Gas will be supplied from the offshore John Brookes gas field with first delivery planned for early 2008. LNG from the plant will be used as a substitute fuel for diesel-powered heavy trucks and remote power stations.

Meanwhile, Carpenter said Woodside Petroleum's new Xena gas discovery adjacent to Pluto would make it even easier for the company to comply with the gas reservation policy.

Woodside has led industry opposition to the gas reservations plan, arguing it could jeopardise its $5 billion proposed Pluto LNG development.

Carpenter urged Woodside to minimise the construction costs of its wholly owned Pluto project by processing the gas at the existing facilities at the North West Shelf joint venture.

"They want a stand-alone project but there are other options for them and that is to go in with their partners to use that existing infrastructure," he said.