UPDATE 3-Shell sticks to $18 bln Qatar plant price tag

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By Odai Sirri

RAS LAFFAN, Qatar, Feb 22 (Reuters) - Royal Dutch Shell (RDSa.L) said on Thursday it was sticking to its maximum cost estimate of $18 billion for its Pearl superclean fuel plant in Qatar after a local official said the cost would exceed $20 billion.

Pearl is central to Shell's efforts to boost output after it ceded control of the Sakhalin-2 oil and gas project in Russia's far east to state-controlled Gazprom (GAZP.MM) last year.

"There is absolutely no reason to change our cost guidance," Shell's Chief Executive Jeroen van der Veer told Reuters at a ceremony to break ground at the 140,000 barrels per day (bpd) gas to liquids project.

The estimate included inflation and building costs for the plant at the huge industrial city of Ras Laffan, he said at the ceremony, which was also attended by Britain's Prince Charles and Qatar's Energy Minister Abdullah al-Attiyah.

The total expected 3 billion barrels of oil equivalent of output from Pearl would cost $4 to $6 each, van der Veer said.

"It's rare we are spot on to the dollar," said Linda Cook, head of Shell's gas and power division.

"Some projects are a bit more, some a bit less. But the majority of projects we execute come in within our estimates at the time we take the investment decision."

A Qatari official told Reuters on Wednesday the plant would cost over $20 billion, up from an original budget of $5 billion and above Shell's highest estimate.

Rising prices for materials such as steel and shortages of manpower are boosting costs in the oil and gas industry, which is straining to bring on new capacity to meet rapid growth in global energy demand.

Exxon Mobil (XOM.N) pulled out of a similar scheme in Qatar on Tuesday because of spiraling costs, and some analysts have doubted the wisdom of Shell's Pearl project.

PROVEN PROCESS

Shell is pushing ahead and maintains that Pearl will be profitable. The ceremony on Thursday was a formality -- Shell began construction in the third quarter last year, and has already awarded $10 billion of contracts that cover all the major engineering, procurement and construction work.

Shell executives said they were confident that they already had the complex technology needed for Pearl.