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A Chinese conglomerate's successful bid for the right to develop prime land in the Kimberley is just the first step in a billion-dollar plan tied to WA's Ord irrigation scheme flowing into the Northern Territory.

Premier Colin Barnett will announce on Tuesday that Shanghai Zhongfu is the preferred developer for all 15,000ha available under the latest stage of the Ord expansion.

The company is also deep in negotiations with the Northern Territory Government on a deal that will double its footprint in the north and depend on even more water from Lake Argyle's huge reserves.

NT Primary Industry Minister Willem Westra van Holthe confirmed yesterday that his Government was in talks with Shanghai Zhongfu on the release of land suitable for the irrigation scheme.

"Shanghai Zhongfu has expressed an interest in the land on the NT side of the border and we are continuing talks with them and other interested parties," he said.

"The expansion of the Ord project in to the Northern Territory is a priority for this Government."

Mr Barnett said yesterday that the State Government was starting negotiations with the Federal and NT governments on extending the irrigation scheme.

In April, Shanghai Zhongfu said it needed 30,000-40,000ha of land to grow sugar cane to make its plans to build a state-of-the-art sugar mill near Kununurra economically viable. It cannot grow sugar cane in the NT without water from the largely untapped reserves of Lake Argyle, which feeds the Ord irrigation scheme.

Sugar industry experts said it would cost more than $500 million to build a state-of-the-art mill in the Kimberley. The Chinese group will also need to invest heavily in infrastructure and Aboriginal community development, and meet land clearing costs.

It is believed Shanghai Zhongfu will pay the State Government a peppercorn rent for a 50-year lease on the Ord farmland, which under the terms of the release was not available for freehold sale if allocated to a developer in a parcel of more than 7500ha. The Chinese company will be charged for water use at the Ord, with the cost estimated at $3 million-$3.75 million a year, and could start clearing land by the middle of next year.

Nationals Senate leader Barnaby Joyce has raised fears that Shanghai Zhongfu will not pay tax in Australia but legal experts said the company would pay tax under transfer pricing regulations even if it did not declare income.

The mill is expected to have cogeneration capacity and produce food-grade sugar and ethanol for export from Wyndham. Shanghai Zhongfu, trading in Australia under the name Kimberley Agricultural Investments, declined to comment to _The Weekend West _.