Colin Barnett has warned that WA would be unable to secure domestic gas from the Browse project if the liquefied natural gas hub was built offshore.
The proposed hub at James Price Point is a critical part of the State Government's 20-year energy blueprint, which banks on the Kimberley project providing domestic gas from 2023.
There has been growing speculation in recent months the Browse joint venture partners, led by Woodside, could jettison long-held plans to build the hub near Broome in favour of a floating platform. The technology is being championed by Royal Dutch Shell, which has advanced plans to use such a platform on the smaller Prelude gas field nearby and believes it could radically cut costs.
The Premier strongly opposes the idea of a floating LNG development, arguing it would cost jobs and deny benefits to indigenous groups.
Mr Barnett warned that developing Browse offshore would deny the State the chance to apply its domestic gas reservation policy.
An offshore project would fall under Federal jurisdiction, where no such measure applies. "The 15 per cent domestic gas reservation policy is Government policy," Mr Barnett said.
"The problem with floating LNG is that no gas will come onshore for householders or industry."
As part of a policy introduced by the previous Labor government, gas projects in WA must set aside 15 per cent of supplies for domestic purposes, such as electricity generation and industry.
But the policy is only relevant if a gas project is landed onshore for processing or if the gas resource lies within State waters up to three nautical miles offshore.
The gas supply dilemma is likely to be compounded by the expiration of long-term gas contracts with the North West Shelf venture in 2015, when authorities must renegotiate supply terms.
Mr Barnett's comments came as the Maritime Union of Australia stepped up its campaign against FLNG at Browse, arguing it would be disastrous for jobs, the environment and workers' safety.
Woodside, which has consistently declined to comment on debate about the move towards FLNG, stressed WA's domestic gas reservation policy was a matter for the State Government.