MONTREAL (AFP) – Oil company BP announced Friday that is abandoning plans to build a refinery in eastern Canada, citing the recession and a drop in the demand for gasoline (petrol) in the United States and Canada.

BP has worked for the last 18 months with Canadian firm Irving Oil to study the feasibility of building a refinery in St. John, on the Atlantic coast of Canada's New Brunswick province.

The two companies have reached the conclusion that "the project was not viable at a time of global economic recession and dampening forecasts for petroleum product demand in North America," BP said in a statement.

"It became clear, particularly over the past year, that the market conditions for refining have changed since BP and Irving Oil entered this memorandum of understanding," said Iain Conn, chief executive of BP's refining and marketing business, in a statement.

"We are, therefore, unable to move forward with an investment of this kind," he said.

The two companies have not publicly stated the value of the project, but multiple US media reports have said it could be close to 7.4 billion dollars.

Irving Oil and BP did not rule out the possibility of reviving the project in the future, if economic conditions improve sufficiently.

Canadian company Irving Oil already operates a Saint John refinery considered the most important in Canada, with an output of 300,000 barrels a day. About 80 percent of its production is exported to the United States.

In June, the firm opened the first liquid natural gas terminal in Canada, with a distribution capacity of 28 million cubic meters a day.

That project, also based in St. John, was a collaboration between Irving Oil and the Spanish gas giant Repsol.