Media speculation has tipped Shell would move to sell down its interest in Woodside as part of a wider asset sell-down.
According to Reuters, the holding, worth about $6.4 billion and left over from Shell's abortive attempt to acquire Woodside in 2001, has long been viewed as non-core to Shell.
This year, the Anglo-Dutch company promised to accelerate asset sales to reflate a narrowing cushion between cash inflow and investment spending.
Reuters was unable to verify Shell's intentions for the stake. Shell and Woodside declined to comment on its future.
Bankers say the holding is an obvious sell-off candidate for incoming chief executiveBen van Beurden, who takes the job on 1 January and will offer strategy pointers on 30 January along with fourth-quarter results.
However, they say, other investor-owned international oil companies big enough to buy it are also in sell-off mode.
Meanwhile, a strategic buyer such as one of China's top oil companies or the national oil companies of gas-hungry countries such as India or Thailand might be put off by Shell's experience with the Australian government when it tried to take full control of Woodside in 2001.
"Bidder-wise, it's a tricky one," one banker told Reuters.
"The deal is big enough to require a review by the government, and although Woodside is not as important as it was at the time when Shell's bid was blocked, it is still the largest independent oil company in Australia, so I don't think the Chinese NOCs would be welcome."
The banker suggested Middle Eastern or Southeast Asian sovereign wealth funds might be interested, but said Shell probably would not find a buyer among them for the entire stake and would have to sell in small blocks.
The banker predicted Shell would exit via a combination of strategic sales, market placements and probably a share buyback by Woodside.
A second banker said the stake as a single block had been "shopped" to a number of potential strategic buyers without result, and predicted the shares would be spread in the market among institutional investors.
Shell's interest in the plentiful offshore gas under Australia's northwest shelf dates back decades and remains strong through its Prelude floating liquefied natural gas project, which will draw gas from below the seabed and process it on board the world's largest vessel.
The company built a 34% holding in Woodside as part of that interest. Shell also became, and remains, a partner in the Woodside-operated Browse LNG project, which is set to use Prelude FLNG technology.
In 2001, Shell's attempt to increase its Woodside holding to a majority was blocked by the Australian government on the grounds that the move might slow gas development in Australia.
The country is set to become the world's biggest LNG exporter later in the decade, overtaking Qatar, as a number of major LNG projects come to fruition.
Shell sold a third of its Woodside holding in 2010, reducing that 34% stake to the 23.1% it holds now.
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