QATAR - Oct. 15 - Shell In [pounds sterling]2.4bn Qatar Gas Deal.

Royal Dutch/Shell, the world's third biggest listed energy group, is expected to announce a deal worth more than [pounds sterling]2.4bn ($4bn) with Qatar on Oct. 20 to develop the world's largest natural gas to liquids plant. Shell's investment in the relatively untested field of converting natural gas into liquids, such as environmentally friendly diesel, is similar in size to the Sakhalin II liquefied natural gas project in Russia, one of the company's biggest ever investments. "No one has yet established a world-scale GTL plant, " says, an analyst at Williams de Broe Andrew Whittock. "The robustness of the technology to low oil prices has not been tested yet". The 137, 000 barrels-a-day plant, which is expected to start production by the end of the decade, would be more than 10 times the size of Shell's plant at Bintulu, Malaysia, which is the world's largest. Shell says: "We are talking to the Qataris and hope to sign soon". The GTL produced in Qatar is planned for export markets unlike the output from Malaysia. GTL can be used as a blend or on its own in new diesel engines. Shell has done GTL tests with buses in London and VW Golf cars in Berlin. Producing GTL is still an expensive option and Shell is banking on the expected surge in the need for cleaner burning diesel, especially in Europe where regulations due to come into force will cut the permitted poisonous emissions by half. Sales of diesel powered cars in Europe have doubled in the past seven years and are expected to make up half the total fleet by 2006. GTL fits into Shell's strategy to sell brand-marked petroleum products and helps support the company's drive to be seen as environmentally conscious, says the analysts. The agreement - for which chairman of Shell, Sir Philip Watts, is scheduled to travel to Qatar - will bring the Anglo-Dutch company back into the small Arab state, where the world's largest oil company and one of Shell's biggest competitors, ExxonMobil, has a large liquefied natural gas operation. Like LNG, GTL allows energy companies to make use of vast reserves of natural gas much of which is otherwise seen as "stranded" - too far from the nearest big consuming region to be sold in its raw form. The announcement, expected just days before Shell's third quarter results presentation, is important for the company, which has been trading at a significant discount to ExxonMobil and BP, its closest rivals. This is partly because of its inability to expand its reserves base.