The joint venture project, operated by Japan's Inpex with French oil major Total, was given the formal go-ahead on Friday and brings investment committed in LNG developments in Australia to a massive $175 billion, reports The Australian Financial Review.

Japan is the world's biggest consumer of LNG, and Australia's biggest customer. Inpex will become the first Japanese company to operate a major LNG project anywhere in the world.

Ichthys will become Australia's second largest resources construction project behind Chevron's $43 billion Gorgon LNG project in Western Australia and help quadruple Australia's LNG production capacity from the present total of about 20 million tonnes a year.

"Australia is well on track to become the major gas supplier in the Asia-Pacific region, the world's engine room of economic growth in the 21st century," Resources Minister Martin Ferguson said in Darwin.

"We are entering a golden age of gas."

Australia is the world's fourth biggest supplier of LNG behind Qatar, Indonesia and Malaysia.

Mr Ferguson predicted the new development would make Australia the world's biggest LNG supplier by 2017 or 2018.

But the flood of investment in LNG projects and inflated wage claims has led to warnings that cost blowouts could threaten future projects.

Macquarie Equities analyst Adrian Wood estimates cost inflation in the local LNG sector is running at 10 to 15 per cent a year, eroding returns from some "already marginal" ventures and inviting greater competition from rival international ventures. Mr Wood is forecasting cost blowouts of 25 to 40 per cent for some developments and schedule delays of several months. Bernstein Research says LNG project costs in Australia have quadrupled in less than a decade.

The Australian Mines and Metals Association's chief executive, Steve Knott, said future resources project investment was threatened by wage costs, which have risen by 40 per cent in the offshore industry over the past six months.