A massive gas deal between Russia and China could lead to weaker returns from Woodside Petroleum's flagship Browse project in Western Australia.
China and Russia last week signed a monumental, multi-decade gas supply contract worth up to $US400 billion ($A432.78 billion).
Experts believe Russia's Pacific gas strategy could affect global competition and price negotiations between Australia and its trading partners Japan, China and Korea.
Woodside has played down the impact of the deal on the marketing of Browse liquefied natural gas (LNG) as it targets Japan rather than China.
But the deal is likely to make it more difficult for new Australian projects to get off the ground due to increased competition, higher costs and lower gas price forecasts, the latest EnergyQuarterly report by Energy Quest shows.
EnergyQuest principal Graeme Bethune said Woodside's Browse floating LNG project still looked "pretty robust" but the joint venture partners would have to "sharpen their pencils" on pricing.
"The competition is increasing," Dr Bethune told AAP.
"Woodside might have hoped to earn an internal rate of return of X, now it might be X minus Y, where Y is a reduction."
PetroChina, which is behind the Russian deal, has a 10.2 per cent interest in Woodside's Browse joint venture, with a final investment decision due in the second half of 2015.
Amid increased global competition, Woodside is monitoring Japan which now has a large stake in US LNG.
Dr Bethune described the Russian deal as a potential game-changer in Australia's key LNG market.
"To have any chance of seizing and participating in the next wave of LNG developments, Australia can no longer rely therefore on 'being first in the queue," he said.
Still, the Energy Quest report found Australia had moved quickly to establish 10 LNG projects and there was potential to expand brownfields projects such as Australia's largest gas project Gorgon which is 80 per cent built.
"Unfortunately, Australia's LNG speed has often come at the expense of good project execution with consequential higher costs," Dr Bethune said.
This had opened up opportunities for lower cost competitors like the US, east Africa and, now Russia.
He added that the Russian gas deal may also make it more difficult to push ahead with Canadian LNG projects.
Woodside has a land access agreement to conduct feasibility studies to build a LNG export facility at Grassy Point on the northwest coast of Canada.
Dr Bethune described China's gas deal with Russia, which holds the world's largest gas reserves, as a significant development which could underpin further LNG projects in the Pacific region once a pipeline to Vladivostok is built.
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