(Adds detail and analyst comments)
LONDON, July 18 (Reuters) - Royal Dutch Shell hassuspended development of a liquefaction unit at Canada's JumpingPound facility, which was to be used to develop the emerging gasfor transport market.
Gas liquefaction is increasingly being produced for use intransportation of large road vehicles, in trains, and as ashipping fuel.
"We believe LNG (liquefied natural gas) in transport is aconsiderable opportunity for Shell, but it is an emerging marketand we must have a balanced approach to its development, (so) wehave suspended development of the liquefaction unit at theJumping Pound facility," a Shell spokseman said on Friday.
Shell is the major owner of the Jumping Pound complex insouthern Alberta, Canada, which has produced natural gas since1951 and has an overall production average of 300 million cubicfeet per day.
Shell said it was continuing work in the Canadian GreenCorridor project and the retail LNG programme with Shell FlyingJ in Canada.
"This as another sign that the new CEO (Ben van Beurden) isapplying a greater degree of discipline in allocating capitalthan was previously the case and is actively streamlining the'options' in the portfolio which are to be pursued," DeutscheBank said in a note.
The shale gas production boom has pulled down natural gasprices in North America, while at the same time new maritimeenvironemntal environmental laws are raising the cost of oil inthe shipping sector, making LNG competitive with oil intransport.
However, development costs remain high. "This means makingtough choices around the projects we develop in order redeployour resources, focus our efforts and our capital to create thegreatest value for our business," Shell said.
Although shipping analysts say that the use of LNG to powerships is expected to dramatically increase by 2020, they alsopoint to high development and maintenance costs as factors thatare scaring off investors.
"Based on current investment levels and prices, retrofittinga vessel's engine to burn LNG produces a payback period longerthan a vessel's asset life. In addition, availability of LNG andmethanol as a bunker fuel remains scarce and the infrastructuresimply isn't in place yet for bulk trades," Ship broker ACM saidin a report. (Reporting by Henning Gloystein, Ron Bousso and Jonathan Saul,editing by William Hardy)