A spokeswoman said on Saturday that the world's second-largest non government-controlled oil company by market capitalisation was pulling out of Phase 13 of the giant South Pars gas field but may yet join later stages of the field's development.
Shell, Spain's Repsol and the National Iranian Oil Company (NIOC) signed a Memorandum of Understanding in January 2002 to develop Phase 13 in a project to be known as Persian
At the time, Shell said deliveries of liquefied natural gas -- gas cooled to liquid under pressure for transportation in special tankers -- could begin in 2007.
However, United Nations sanctions on Iran related to its nuclear programme, which it claims is for power generation but which the U.S. and European states believe is aimed at developing weapons, and criticisms of the deal from U.S. politicians and investors, slowed progress.
Meanwhile Iran grew impatient and threatened Shell with eviction from the project if it did not commit formally.
The spokeswoman for the Anglo-Dutch company said:
"We have agreed the principal of substitution of alternative later phases for the PLNG project so that INOC can proceed with the immediate development of Phase 13."
She would not give a reason for the decision. Repsol was not available for comment.
Iran will now need to find new partners for the project. Media reports have suggested Russia's Gazprom, Indian Oil Corp and Chinese companies could join, as they are expected to be less susceptible to U.S. political pressure, but the companies have limited experience of LNG.