Excessive wage demands are threatening major energy projects in Australia, a federal Labor minister says.

Woodside Petroleum last month dumped a $45 billion liquefied natural gas project which was proposed for James Price Point, in Western Australia.

Joint venture partner Royal Dutch Shell is instead proposing a floating LNG plant, known as Prelude, which Western Australia fears could affect state royalties and local jobs.

Resources and Energy Minister Gary Gray, a former Woodside executive, says while he prefers the onshore proposal, unions need to be mindful of making unreasonable wage demands that are not linked to productivity.

He says generally speaking, unreasonable wages are a factor in company decisions.

“Then we get to some wage and cost pressures driven by union demands,” he told reporters in Brisbane on the sidelines of an Australian Petroleum Production and Exploration Association conference in Brisbane.

“We do have to be conscious that unreasonable wage demands do place pressures on projects – wage demands that are accompanied by productivity are in a different category.

“I’ve been a member of a union all of my life, my observations are not anti-union.”

With Woodside’s joint venture partner Royal Dutch Shell now pushing for a floating LNG facility, Mr Gray said his cabinet colleague, Environment Minister Tony Burke, needed time to approve the revised proposal.

“It’s not for me to tell Tony how to do his job,” he said.

But Mr Gray said he preferred the original onshore plan, as the West Australian parliament examines how floating LNG projects would affect the state economy.

“We can do these developments on the Kimberley coast,” Mr Gray said.

Coalition energy spokesman Ian MacFarlane echoed Mr Gray’s concerns about wages pressures.

“We will not see a greenfield, onshore LNG plant in Australia for at least a decade …and if we don’t address our productivity, then the future in LNG is in brownfields and floaters and I don’t think that’s optimum,” he told reporters.