Plans to build a petrochemical plant in Qatar have been halted in response to the drop in oil prices.

Qatar Petroleum and Shell said on Wednesday that they will no longer proceed with the proposed Al Karaana petrochemicals project. The decision was made after the two partners evaluated commercial quotations from engineering, procurement and construction bidders and found that high capital costs made the $6.4 billion project commercially unfeasible, "particularly in the current economic climate prevailing in the energy industry."

This is not the first project to be delayed or cancelled since oil prices started tumbling, the Financial Times reported. Premier Oil recently revealed that it was deferring new field developments until prices recovered, while Statoil has relinquished three exploration licences on the west coast of Greenland.

State-owned Qatar Petroleum and Shell first unveiled plans for the Al Karaana project in December 2011, when they said they intended to build a world-scale petrochemicals complex in Ras Laffan Industrial City. The facility was expected to include a steam cracker, with feedstock coming from natural gas projects in Qatar; a mono-ethylene glycol plant of up to 1.5 million tonnes per annum using Shell's OMEGA technology; 300 kilotons per annum of linear alpha olefins using Shell's SHOP process; and another olefin derivative.

The project was to be operated as a stand-alone joint venture, with Qatar Petroleum holding an 80 percent equity interest and Shell 20 percent. The complex would have produced petrochemical products largely intended for Asian markets.

Saad Sherida Al-Kaabi, president and CEO of Qatar Petroleum, said today that the company will examine how best to utilize the ethane feedstock made available after the decision not to go ahead with Al Karaana. The aim is to maximize the benefit from available synergies by utilizing existing facilities and infrastructure in this sector, he said.