Woodside said the agreement would provide a framework to use the floating liquefied natural gas (FLNG) technology as a development concept.
It said it would immediately discuss the agreement with its joint venture participants Shell, BP Australia, Japan Australia LNG and Petrochina International, which would have to agree to use FLNG for the proposal to proceed.
Chief executive Peter Coleman said FLNG would allow Woodside to commercialise the Browse resources in the shortest possible timeframe.
“This agreement enables Woodside, as operator of the Browse LNG development, to strengthen our development and operational capabilities through the potential use of Shell’s ‘design one, build many’ FLNG technology,” Mr Coleman said in a statement.
“It also provides the opportunity for Western Australia to become an industrial, operational and technology centre for excellence for floating LNG worldwide.”
Opposition spokesperson for mines and petroleum Bill Johnston urged Premier Colin Barnett to step in prevent Browse gas being developed using offshore processing, calling it a "disaster for Western Australia".
"Processing the gas offshore will mean no Browse gas will ever flow to Western Australia's domestic market, which would be a huge failure on Mr Barnett's part," Mr Johnston said in a statement.
"Mr Barnett must attempt to salvage any opportunities that remain for Western Australian domestic gas, even if that means developing a processing plant at the Burrup Peninsula or somewhere else."
Floating processing for the Browse gas field was widely speculated to be Woodside’s preference after it pulled out of plans to build an onshore plant at James Price Point earlier this month.
The cost of an onshore plant at James Price Point had reportedly blown out to $45 billion, but Woodside did not release its costings.
Shell is currently constructing a floating LNG facility, known as Prelude, in a project worth $12 billion.
Earlier this month, Woodside said its options for Browse included FLNG, piping the gas to an existing Pilbara plant or building a smaller facility at James Price Point.
At 12:30PM, Woodside shares were down 2.5 per cent, trading at $37.58.