* Standard Life says to vote against $49 bln deal
* But major shareholder advisory ISS endorses deal
* Shell confident deal will win support in Jan. 27 vote (Recasts with Standard Life, updates shares)
By Ron Bousso
LONDON, Jan 8 (Reuters) - Royal Dutch Shell's bidto acquire BG Group was dealt a blow on Friday when afirst major shareholder said it would vote against the $49billion deal due to a weak outlook for oil prices.
Standard Life Investment's announcement came on the same day influential shareholder advisory firm Institutional ShareholderServices (ISS) endorsed the deal, saying the downturn in oilmarkets did not detract from its strategic benefits.
The first public sign of dissent from a key investor wasunlikely to scupper Chief Executive Ben van Beurden's drive towin the required shareholder support in a January 27 vote.
Few investors or analysts have openly challenged the deal'sstrategic benefits for Shell, which will become the world's topliquefied natural gas trader and a major offshore oil producer.
But with crude oil prices languishing near 12-year lows ofaround $34 a barrel and forecasts of a slow recovery, investorshave raised concerns about the viability of the cash-and-sharedeal that would increase Shell's debt burden.
"We have concluded that the proposed terms of theacquisition of BG are value destructive for Shell shareholders,"David Cumming, head of equities at Standard Life Investments,said in a statement.
"This view is based on the downside risks to Shell's oilprice assumptions plus the tax and operational risks surroundingBG's Brazilian asset base. Consequently we shall vote againstthe deal."
Standard Life is the 11th largest holder of Shell's B shareswith a 1.7 percent stake. Shell B shares make up the sharecomponent in the cash-and-share acquisition that is expected tobe completed on February 15.
COMPELLING RATIONALE
ISS, which advises around 5 percent of Shell's medium andsmall shareholders, said they supported the deal "given thecompelling strategic rationale, and the significant positiveeconomics to be realised within a relatively short time frame."
The current low oil price "may be of very little value inassessing the strategic opportunity of a transaction whosebenefits will be realised over decades," ISS said in a report.
Shell remained confident of winning the vote. "We continueto believe we have the broad base of shareholder support we needfor the deal to complete," a Shell spokesman said.
Guy Jubb, head of governance at Standard Life Investments,urged Shell to renegotiate the deal, announced last April.
On Wednesday, Chief Financial Officer Simon Henry toldanalysts Shell had conducted stress tests that showed it couldwithstand oil at $50 a barrel over the next two years, itslowest estimate to date as it seeks to secure shareholdersupport, sources told Reuters.
To weather such an environment, Shell plans to cut capitalspending further below the planned $33 billion for 2016, delayshare buybacks and extend scrip dividends, where investors areoffered discounted shares instead of cash, Henry told analysts.
ISS said that the combination would allow Shell to replenishoil and gas reserves, lower production costs and ensure dividendcover "at what seems an opportunistic point" due to BG'sfinancial profile and the oil market's cycle.
"There is credible evidence... that the price Shell ispaying is reasonable even considering the decline in oil pricesand oil stocks since the deal was announced."
Royal Dutch Shell B shares were down 5.9 percent at 1757GMT, compared with a 3.65 percent decline for the broader sectorindex.
(Reporting by Karolin Schaps; Editing by Alexander Smith andAdrian Croft)