* Buyback fails to win 75 percent support
* Shell left with 13.6 pct stake in Woodside
* Woodside opposes buyback to all shareholders on same terms
* Woodside shares fall 1.8 pct (Adds Shell comment)
By Sonali Paul
MELBOURNE, Aug 1 (Reuters) - Woodside Petroleum Ltd failed to win shareholder approval to buy back $2.68 billion ofits shares from Royal Dutch Shell Plc, Australia's topoil and gas company said after a vote on Friday.
Defeat of the buyback leaves Shell holding a 14 percentstake in Woodside that it intends to sell, which will continueto weigh on the Australian company's shares, an overhangWoodside was trying to remove.
The buyback won 72 percent support but needed 75 percentapproval to go ahead, Woodside said. Its shares were tradingdown 1.8 percent at A$41.76 after the final vote count wasreleased, in a broader market down 1.5 percent.
Shell, a long-time investor in Woodside, was aiming to selldown its stake from 23.1 percent to 4.5 percent as part of aseries of global asset sales to help cut soaring costs and boostreturns to shareholders.
Half of the share parcel was sold to institutions, whileWoodside planned to buy back and cancel the remaining 78.3million shares in a bid to smooth the impact of Shell'ssell-down.
However, the buyback was opposed by some investors as it didnot treat all shareholders equally and would have given Shellaccess to A$1 billion ($929 million) in tax credits coveted byAustralian investors.
Woodside chairman Michael Chaney acknowledged the issueahead of the vote, telling a shareholders meeting the board hadnot been looking for the best way to execute a buyback.
"The buyback was merely an efficient mechanism to assistwith the exit of Shell from the register and the only optionavailable to achieve our aim," Chaney said.
Shell said following the vote that it is "reviewing itsoptions in relation to its remaining 13.6% holding in Woodside."
One investor that opposed the plan, Plato InvestmentManagement, said the deal discriminated against Australianpension funds and charities, who would have had more to gainthan Shell from the local tax credits.
"If the selective buy-back is not approved, we will lobbyWoodside to undertake an open access buy-back on broadly similarterms to the selective buy-back," Plato said on its web site(www.plato.com.au).
Chaney said a broader buyback was not the answer and did notspell out an alternative plan, adding only that the board wouldcontinue to review the company's capital position.
"An equal access off-market buyback would involve lesscertainty regarding the price and quantum of the buybackdepending on shareholder participation and would not provide anorderly reduction of Shell's shareholding in Woodside," he said.
Shell has long flagged it wanted to sell its stake inWoodside, part of a long retreat from a company it tried to takeover in 2001. Chief Financial Officer Simon Henry told reporterson Thursday that Shell was not dependent on the buyback goingahead to meet its target of selling $15 billion in assets.
He said Shell would take its time to consider its options ifthe Woodside sale did not go ahead.
Shell already sold a 9.5 percent stake to institutions inJune for A$3.24 billion. The buyback would have taken the totalto $5.7 billion.
($1 = 1.0764 Australian Dollars) (Reporting by Sonali Paul, additional reporting by Ron Bousso;Editing by Richard Pullin and Elaine Hardcastle)
