* Shell still interested in further GTL projects
* Sasol, Eni to study building plant in Mozambique
* Smaller-scale GTL may provide a way forward (Adds investor quote, paragraphs 14-16)
By Alex Lawler
LONDON, July 10 (Reuters) - Shell will press on with new plants to convert gas to liquid fuels, its investment and technical edge leaving its peers behind in the process once seen as a radical game changer.
The company has seen costs overrun at its flagship Qatar plant, cancelled a U.S. project and is relying on a favourable link between prices for feedstock natural gas and oil - factors which have jangled the nerves of some investors in Royal Dutch Shell
Investors are also wary of the massive upfront costs companies face in building the gas-to-liquids (GTL) plants. Only Shell and South Africa's Sasol have so far made GTL plants work on a large scale.
"Shell is so far ahead technically," said Ed Osterwald, who has advised companies and governments on GTL and is a partner at consultants Competition Economists Group. "It is hard to see how another large company is going to replicate that."
Recent indications on GTL's prospects have been mixed. Costs overran at Shell's $19 billion plant in Qatar. In December it cancelled a proposed plant in Louisiana as costs rose.
But last week, Sasol said it will carry out a feasibility study to build a large site in Mozambique with Eni of Italy. Shell is also studying the feasibility of building a plant there.
The plants are based on a process developed in the 1920s by two German scientists, Franz Fischer and Hans Tropsch. Shell has developed the process further and has more than 3,500 patents. Sasol also has its own GTL technology.
Only a handful of projects exist. Shell operates Pearl in Qatar, the world's largest, and has a smaller site in Malaysia. Sasol has a plant in Qatar and plans to build more, including in the United States. A Chevron project in Nigeria using Sasol technology is starting this year.
A decade or more ago, the prospect for GTL looked brighter. "Gas into oil may revolutionise energy" read a Reuters headline from 1998. Exxon Mobil in the early 2000s planned a similar plant to Pearl, but in 2007 cancelled it.
Shell says that the cancellation of its own U.S. project does not mean it has given up on expanding.
"We continue our investment into technology development and product development to increase the value of future GTL projects," said Guy de Kort, a Shell vice president, at a conference in London.
"We are pursuing other opportunities as well. But the economics have to be convincing enough to put our money there."