By Sarah Young
LONDON, Jan 20 (Reuters) - Royal Dutch Shell saidon Monday it had agreed to sell stakes in a gas project inWestern Australia for $1.14 billion as part of the oil company'sdrive to improve its return on investment.
Shell said it is selling an 8 percent stake in theWheatstone and nearby Iago gas fields as well as a 6.4 percentstake in the related Wheatstone liquefied natural gas (LNG)project to the Kuwait Foreign Petroleum Exploration Company(KUFPEC).
The move raises KUFPEC's holding in the Chevron-led LNG project, in which the state company is already a partner, to13.4 percent.
"We are making hard choices in our worldwide portfolio toimprove Shell's capital efficiency," Shell chief executive Benvan Beurden, who took over two weeks ago, said in a statement.
"We are refocusing our investment to where we can add themost value with Shell's capital and technology," he said, addingthat the company would remain a major player in Australia'senergy industry.
KUFPEC is focused on using OPEC member Kuwait's oil wealthto diversify into energy projects abroad. Wheatstone, one of thesuper-sized Australian LNG projects due to come on stream overthe next few years, is about 25 percent complete.
With some 80 percent of its future production committed toAsian buyers, the project is scheduled to cost about $29billion. Chevron expects capital spending on it to peak thisyear.
Shell issued a "significant" profit warning for the fourthquarter on Friday, in which it detailed across-the-boardproblems, less than three months after its third-quarter profitsundershot analyst forecasts.
Analysts and shareholders said the company's weak resultswould push the world's number-three investor-controlled energyfirm to keep a tighter control on costs after it said 2013capital expenditure would peak at about $45 billion.
Since van Beurden began working alongside outgoing bossPeter Voser at the start of the fourth quarter, the company hascancelled plans to build a gas-to-liquids plant in the UnitedStates, raising investor hopes of a tighter spending regime.
Shell's Arrow Energy joint venture with PetroChina Co Ltd in Australia said on Monday it had carried out a"review of staffing levels as it manages costs," declining toconfirm reports it may cut 600 jobs, or half its workforce.
The cost cutting bolstered speculation that Arrow's proposedA$20 billion LNG project in Queensland may be shelved in favourof selling gas to one of three rival projects in the state ascosts have soared amid an LNG construction boom.
Arrow said it "will continue to assess development options,including collaboration opportunities, as it looks to developsignificant gas reserves."
Shell is not the only big energy company facing increasinginvestor pressure to hold down spending as costs rise andprospects for higher oil prices wane.
At $1.14 billion, the Wheatstone disposal kicks off a yearin which Shell said it would significantly step up disposals tokeep cash flowing in.
Recent media reports have suggested the company'sdivestments could total $15 billion this year, equivalent toaround 6.5 percent of its $232 billion market capitalisation.
"The thing that Shell has to do is accelerate divestmentsand re-instill capital discipline so in that vein it'spositive," Santander analyst Jason Kenney said.
Analysts and bankers say another of Shell's Australianassets, its 23.1 percent stake in Australian group WoodsidePetroleum - worth over $6 billion at current prices -could be put on the block.
Shares in Shell traded down 1 percent at 2,153 pence at 0939GMT, underperforming Britain's blue-chip index.
Chevron has a 64.14 percent stake in Wheatstone,which is due to come on stream in 2016. The other stakeholdersare Apache Corp with 13 percent, Tokyo Electric Power Co with 8 percent and Kyushu Electric Power Co with 1.46 percent.
