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Narrows guidance on second-quarter LNG and gas output

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Unplanned US maintenance weighs on chemicals business

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Shares underperform wider European energy index

(Adds share price, analyst comment, background on plan to sell

chemicals assets)

By Shadia Nasralla

LONDON, July 7 (Reuters) - Shell expects

quarterly earnings to be hit by weaker trading in its integrated

gas division and losses at its chemicals and products

operations, it said on Monday ahead of second-quarter results

due on July 31.

The energy group's chemicals business suffered unplanned

maintenance at its Monaca polymer plant in the United States

while trading in its chemicals and products business was

significantly lower than in the first quarter, it said.

Shell shares were down 2.8% at 25.54 pounds by 0824 GMT,

against a 1.4% decline for the wider European energy sector

.

The company has previously said it wanted to explore

strategic and partnership opportunities for its chemicals assets

in the United States and might close some chemicals businesses

in Europe.

A weaker trading performance was probably to be expected,

but the trading update points to a significantly worse than

expected downstream performance, said RBC analyst Biraj

Borkhataria.

In its oil-focused upstream division, Shell raised the lower

end of its guided output, projecting 1.66 million to 1.76

million boed, up from the previously forecast 1.56 million to

1.76 million boed.

The business is expected to record a $200 million

exploration write-off, it said without providing further detail.

For its integrated gas division, Shell gave production

guidance of 900,000 to 940,000 barrels of oil equivalent per day

(boed), compared with the company's previous projection of

890,000 to 950,000 boed.

LNG production by the world's biggest LNG trader is set to

come in at 6.4 million to 6.8 million metric tons in the second

quarter, it said, compared with a previous range of 6.3 million

to 6.9 million tons.

A Shell spokesperson declined to comment when asked for

further detail.

While trading results in its integrated gas division are

expected to be significantly lower than in the first quarter,

Shell is targeting a 4-5% annual increase in LNG sales over the

next five years and 1% annual production growth.

Adjusted earnings at its marketing division, meanwhile, are

set to rise from the first quarter on sales volumes of 2.6

million to 3 million barrels per day (bpd), slightly below

previous guidance of 2.6 million to 3.1 million bpd.