Plans to install a 290-metre floating gas terminal in Western Port have prompted an angry response from residents and environmental groups who rallied against the "great hulking ship" on Sunday.

Energy company AGL is planning to begin work on the project at Crib Point next year amid concerns about mounting energy prices and possible gas shortages.

Crib Point as it is now. AGL and APA plan to anchor the 'regasification' unit off Jetty Berth 2. Credit:AGL

However, locals are alarmed about the potential environmental damage posed by the unit, which would pump gas through a proposed new pipeline to Pakenham for distribution.

The import facility would "regasify" liquefied natural gas shipped in from overseas so it can be used by households and industries in south-eastern Australia.