Australia's Arrow LNG, a joint venture between Royal Dutch Shell and PetroChina , is looking at an option of building on a rival's LNG site to restart its own stalled gas export plans, a source close to the situation said.

The option could surprise some in Australia's liquefied natural gas industry, given spiralling cost pressures faced by most projects. Estimated costs on Arrow's own stalled project have jumped around 40 percent to as much as $36 billion.

Arrow has held talks with Origin Energy to use the site previously reserved for the expansion of Origin's A$24.7 billion ($23.8 billion) plant under construction on eastern Australia's Curtis Island, said the source.

Arrow preferred to build an integrated project, with both coal seam gas production and liquefaction facilities under its control, at least for now, said the source.

"Arrow is looking at it as an option. It is in contact with them (Origin)," said the source, who asked not to be identified as he was not authorised to speak to the media about the matter.

Industry watchers had anticipated that any cooperation would involve Arrow selling its gas to Origin for processing at its plant, but the source said there were "no serious discussions" on gas sales underway.

The option of selling gas and avoiding building a multi-billion dollar LNG plant has been considered a favoured strategy for shareholders as it would maximise returns in the short term.

The advantage of using Origin's site to build its own liquefaction plant is that it would help Arrow save money and time, the source said. Arrow has not yet won environmental approval for its liquefaction project, while Origin has.

Origin has approval for four LNG trains or small processing units, but only two are under construction. Origin might scrap plans for an expansion to four trains, the source said.

Shell and PetroChina have declined comment on any development plans, although the Chinese company, in its interim results briefing in Hong Kong last week, signalled it does not intend to give up on the eastern Australia development.

PetroChina said it would "push forward resource upgrade of overseas unconventional projects, including Australia's Arrow, and shale gas and oil sands projects in Canada."

ORIGIN WILLING TO COLLABORATE

Origin Chief Executive Grant King said in a televised interview with the Australian Financial Review in May that Origin was offering Arrow LNG the opportunity to collaborate on the expansion of its plant under construction as an alternative to building its own LNG plant.

"Ultimately, it's a matter for Arrow, and as I understand it, they're still going through their consenting process," King told reporters in an earnings briefing on Thursday.

Arrow is one of four ventures on Australia's east coast, including Origin's Australia Pacific LNG, that plan to pump coal seam gas and convert it into LNG - a super-cooled form of natural gas that can be shipped in specialized tankers.

Arrow will delay its final investment decision (FID) on its own project to mid-2014, the source said, adding that Shell and PetroChina still needed to approve any postponement.

The partners were also looking at whether Australia might ease environmental and labour restrictions on the LNG industry after a Federal election next month, the source said.

Shell would not give a timeline for final investment, but it has previously said it was considering pushing back a decision from late 2013 into 2014, according to media reports.