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Abu Dhabi's government-owned International Petroleum Investment Co. (IPIC) has announced that plans for the construction of a refinery in Fujairah are in doubt and currently under review following the drop in demand for refined products around the world.

A planned $6-7 billion refinery with production capacity of 500,00 barrels-per-day (bpd) in Fujairah is likely to be at least delayed as IPIC looks at the possibility of changing the configuration of the facility and reducing its size as a consequence of the global economic downturn.

A unnamed senior source at the company is quoted by local media sources as saying "I would not anticipate a contract award for now. It is not a priority. The recent change in economic outlook and production demand outlook made people think that the fast-track process was not as necessary."

The planned facility had already been downgraded in September 2008 from a 500,000 bpd to 200,000 bpd due to lower demand forecasts. Plans for an integrated petrochemicals unit were also shelved.

IPIC was said to be in talks towards the end of last year with two international oil companies about the development of the 200,000 bpd plant in Fujairah, however discussions with both firms reportedly ended in December after failing to result in an award.

IPIC had previously signed an agreement with oil firm Conoco-Phillips to carry out a feasibility study for the Fujairah refinery in 2006, following a front-end engineering and design study by US-based Foster Wheeler. But Conoco-Phillips pulled out a year later, citing rising construction costs.

Meanwhile, a 370 kilometre crude oil pipeline from Abu Dhabi to Fujairah is still on track for completion by early 2010.

The pipeline will carry 1.5 million bpd of crude for export from Fujairah, and is set to have a positive impact on sales of marine fuel at the Middle East's leading bunker port.