* Browse cost cuts not enough to offset tough market
* Floating LNG still preferred option
* Woodside CEO says to focus on "phased" LNG developments (Adds Woodside CEO, analyst comments)
By Sonali Paul
MELBOURNE, March 23 (Reuters) - Woodside Petroleum WPL.AX and its partners have shelved plans to build the Browse floating liquefied natural gas (LNG) project off Australia in the face of a global oversupply, spelling the end of an era of mega LNG projects.
The shelving of the project, last estimated by UBS to cost $40 billion, follows an 80 percent plunge in Asian LNG prices over the past two years after a construction boom that is set to make Australia the world's top LNG exporter.
Browse is one of five projects now stuck on the drawing board in Australia amid a glut of new supply, including from Chevron (NYSE:CVX)'s $54 billion Gorgon project and exports from the United States.
The move came as no surprise after Woodside CEO Peter Coleman flagged last month that now was "not the time to be reckless" in spending capital and that the project partners had failed to line up any customers for Browse LNG. remains committed to the earliest commercial development of the world-class Browse resources and to FLNG as the preferred solution, but the economic environment is not supportive of a major LNG investment at this time," Woodside said in a statement to the Australian stock exchange.
Coleman said Browse remains central to Woodside's growth pipeline but signalled any new developments would be small, rather than committing tens of billions of dollars up front.
"Going forward, Woodside's focus will be on delivering phased and sustainable developments that balance capital exposure and revenue with the realities of the commodities cycle," he said in an emailed statement.
Woodside and its partners - Royal Dutch Shell RDSa.L , BP Plc BP.L , Japan's Mitsui & Co 8031.T and Mitsubishi Corp 8058.T and PetroChina 601857.SS - have been working on cutting costs on the floating LNG project over the past year.
However the cost-cutting effort was not enough to offset the slump in oil and LNG prices. The redesign process has already cost $100 million.
Browse has long faced set backs. It was sent back to the drawing board in 2013 after the partners ditched plans for a $45 billion project with a plant onshore in Western Australia at a site opposed by green groups and some Aboriginal landowners.
Woodside has never said how much the floating project would cost, but it was expected to be well below $45 billion.
"At some point, if there's a recovery - which is looking long-dated in the LNG market - they may come back and revisit it or simply use it as backfill into the North West Shelf," said Andrew Blakely, an analyst at fund manager Perpetual.
Woodside is operator of Australia's North West Shelf LNG project, built in the 1980s, which will need new sources of gas in the next decade.