PERTH - Woodside Petroleum Ltd, Australia's No. 2 oil and gas producer, said on Tuesday about half of the construction workers for its Pluto liquefied natural gas (LNG) project have gone on strike over housing issues.

Contractors for Pluto have gone on a two-day strike to protest against a plan by Woodside to have workers change rooms at the end of each work roster instead of getting their own permanent units during the period of their contract, the Western Australia state construction union said separately.

The strike, if prolonged, could threaten Pluto's construction schedule and potentially drive costs higher.

We're disappointed that this action has taken place and these sort of industrial action could threaten the reputation of Australia's LNG industry, said Woodside spokesman Roger Martin.

He said about 1,500 to 1,600 construction workers turned up to work at the Karratha site in Western Australia on Tuesday morning, compared with the usual 3,500 workers, but added that construction activity was still continuing.

Faced with a chronic labour shortage and tough union laws, the oil & gas and mining industries in Australia have seen escalating labour costs that have at times pressured project costs and timetables in recent years.

Woodside last month raised its cost estimate for Pluto by as much as A$1.1 billion above its first estimate of A$11.2 billion, citing the shortage of skilled labour, such as welders and electricians, as the key factors.

UBS analysts said in a report on Tuesday that the construction timetable for Pluto, currently 82 percent complete, was under threat amid issues related to worker productivity and unions, while the onset of the cyclone season could also lead to project delays and additional costs.

Pluto is currently a single-train processing facility with a production capacity 4.3 million tonnes a year. First LNG shipments are expected to start by 2011. (Reporting by Fayen Wong; Editing by Muralikumar Anantharaman)