UPDATE 2-Australia's Woodside chief executive Coleman retires ahead of plan

* Board continues external, internal hunt for new CEO

* External candidates eyed at BHP, Shell

* Coleman exit comes ahead of $11 bln investment decision (Adds Woodside comment, reported CEO candidates)

MELBOURNE, April 13 (Reuters) - Woodside Petroleum Ltd named its development and marketing head Meg O’Neill as acting chief executive officer on Tuesday, after longtime boss Peter Coleman decided to step down a little earlier than planned.

O’Neill will take over the role on an interim basis from April 20, Australia’s top independent gas producer said.

In December, Coleman had said he planned to retire in the second half of 2021, but he has now brought that forward.

“It’s the right time for Peter. It’s the right time for the board,” Woodside’s spokeswoman said. “There’s still an internal and external search going on.”

Coleman took the helm at Woodside in May 2011 to steer it through two oil price crashes, but has overseen a sharp drop in its share price while paying out big dividends.

Under his watch, Woodside made an aborted takeover bid for Oil Search Ltd, walked away from buying into Israel’s Leviathan gas project, and sold a stake in the undeveloped Browse gas project off Western Australia.

Other initiatives saw it buy into the Sangomar oil project off Senegal and Wheatstone LNG in Australia, Kitimat in Canada and the Scarborough gas project, now its most promising growth option.

Woodside is preparing to make a final investment decision later this year on the $11-billion Scarborough project off Western Australia, while it tackles the challenges of a long-term transition towards cleaner energy.

The company announced Coleman’s early departure a day after rival Santos Ltd said it had agreed to pay its chief executive, Kevin Gallagher, one-time incentives worth A$6 million ($4.6 million) to stay on until 2025.

That sparked speculation that Santos was eager to ensure Gallagher would not be poached by Woodside.

Analysts and industry sources said other candidates heard to be in the running for the top job at Woodside are BHP Group’s petroleum president, Geraldine Slattery, and former Shell Australia chair Zoe Yujnovich, alongside O’Neill. ($1 = 1.3142 Australian dollars) (Reporting by Rashmi Ashok in Bengaluru and Sonali Paul in Melbourne; Editing by Shounak Dasgupta and Clarence Fernandez)