UPDATE 4-Shell plans Alberta LNG plant to supply truck fuel

* Plans small-scale LNG plant in Alberta, first for Shell

* Facility to supply LNG to local truck stops

* Producers aim to expand market for natural gas

* Shell to team with Westport to boost use of fuel

* Westport shares rise 18 pct (Adds details and share prices)

By Scott Haggett

CALGARY, Alberta, Sept 7 (Reuters) - Royal Dutch Shell Plc (RDSa.L) will build a liquefied natural gas plant in Western Canada as it looks to boost demand for its abundant gas reserves by promoting LNG as a truck fuel.

Shell wants to build a small-scale LNG plant at an existing gas-processing facility in the province of Alberta. The plant would supply the local market with fuel for trucks.

"LNG for trucks is definitely growing, but it is still a niche market focused on fleet and trucks because they are diesel intensive. But with more expensive diesel and cheaper natural gas, this may change," said Dave Hurst, senior analyst at Pike Research in Detroit.

Designed to produce fuel for heavy-haul trucks, the plant will supply LNG to Shell's Flying J truckstops in the Alberta cities of Calgary, Edmonton and Red Deer. The network could eventually expand to the neighboring province of British Columbia.

"It's really small-scale liquefaction compared to the typical LNG plants that Shell has been into for 45 years," said Bob Taylor, manager of commercial fuels, business development and marketing for the company's Canadian unit. "We're there to get LNG into the transport market for use (locally) ... LNG is typically produced to take it to markets quite a ways away."

Shell is joining other big producers looking to boost use - and the price - of natural gas by touting it as a transportation fuel. Natural gas production has climbed in recent years and prices have sagged as prolific new shale-gas deposits are tapped.

Along with its new push into the trucking market, the company is also teaming up with equipment manufacturers to raise interest in the fuel among railways, miners and the marine shipping sector.

Encana Corp (ECA.TO), Chesapeake Energy Corp (CHK.N) and other natural gas producers are also promoting the gas to power big trucks, backing a plan put forth by Texas financier T. Boone Pickens, who says the switch could cut U.S. oil imports by 2.5 million barrels per day.

The new plant would produce 0.3 megatonnes per year of LNG, natural gas that is supercooled into liquid form. In comparison Qatargas, the world's largest LNG producer, can handle up to 42 megatonnes a year.

Shell will build the plan at its Jumping Pound gas plant, about 30 kilometers (19 miles) west of Calgary. Work is expected to be completed by 2013. The company declined to say how much the facility will cost to build.

Shell will begin selling LNG at the Alberta Flying J truck stops next year, relying on third-party supplies until its own plant is complete.

It is also teaming up with Westport Innovations Inc (WPT.TO), a Vancouver company that develops natural-gas powered engines, to encourage transport companies to switch over to the fuel and develop standards for its use.

In a separate release, Westport said it expects the partnership will help boost natural gas as a transportation fuel.

"As a result of this initiative, we believe the use of natural gas as a fuel for transportation will accelerate," David Demers, Westport's chief executive, said in the statement.

Westport shares surged on the agreement, rising C$4.19 to close at C$26.85 on the Toronto Stock Exchange.

Royal Dutch Shell shares rose 69.5 pence to 2028.24 pence in London.

($1=$0.98 Canadian) (Additional reporting by Edward McAllister in New York; editing by Frank McGurty)