A resources analyst believes a glut of natural gas is behind a decision to delay a major LNG development in Darwin.

Japanese company Inpex has delayed making a final investment decision on its multi-billion dollar Darwin LNG development until late next year.

The company had originally planned to build the plant in the Kimberley and the WA Premier, Colin Barnett, says he still believes this is a more sensible option.

However analyst, Peter Strachan, says he doubts Inpex will change its mind and says the company is just reacting to a fall in demand for LNG.

"I think what Inpex is doing is waiting until the market recovers so that they can ensure they can get the best possible terms for the product," he said.

Mr Strachan says Inpex will most likely wait until major gas projects like Gorgon and Pluto come online, before it starts production.