The UAE’s energy minister said the country was not worried about the pullout which is not expected to result in a major writedown for Shell

Royal Dutch Shell said it had decided to exit a multi-billion-dollar plan to develop jointly the Bab sour gas field in Abu Dhabi, the latest major project to fall victim to the worst oil-market downturn in decades.

The Anglo-Dutch company said that "following a careful and thorough evaluation of technical challenges and costs" it would stop further joint work on the project with Abu Dhabi National Oil Co (Adnoc).

Shell won in 2013 a tender valued at the time at $10 billion for a 40 per cent stake in a 30-year venture to develop the complex sour gas field, involving the treatment of potentially deadly gasses.

The Bab joint venture envisaged building a sour gas processing plant that would yield 1 billion cubic feet per day, aimed at domestic consumption.

The move was also seen at the time as a stepping stone for Shell to renew a coveted concession to develop the UAE’s largest onshore oilfield.

"The evaluation concluded that for Shell, the development of the project does not fit with the company’s strategy, particularly in the economic climate prevailing in the energy industry," Shell said in a statement.

The decision is not expected to result in a significant writedown for Shell, which reports interim fourth-quarter and full-year 2015 results ahead of a key shareholder vote on its proposed acquisition of BG Group.

Shell shares were down 0.5 per cent, compared with a 0.2 per cent gain for the sector index.

The UAE’s energy minister said the UAE was not worried about Shell’s pullout.

"The reason most probably will be (a) commercial reason because now the cost of gas and the price of gas and LNG has dropped more than 50 per cent," Suhail bin Mohammed Al Mazroui said on the sidelines of a conference in Abu Dhabi.

"We are not worried about supply of gas. We are planning well. If the company is pulling out, I’m not worried," Mazroui said.

Analysts at Bernstein welcomed Shell’s decision to exit "yet another high-cost (and) low-return project" even at the cost of risking long-term relationships with countries.