Abu-Dhabi based Quality Energy Petro Holding is planning to build a 500,000 barrels-per-day refinery in the United Arab Emirates and another smaller plant in Russia, the company's chief executive said on Wednesday.

The UAE refinery has an estimated price tag of $12.8 billion, QE's chief executive Adil al-Otaiba said. Plans were at a preliminary stage, he added.

The decision to proceed with both the UAE and Russian plants would depend on securing a guaranteed supplier of crude locked into a 15-year contract, he added.

"The whole thing is a very, very early stage," he told Reuters, talking of the UAE refinery.

"The main issue is the supply of crude. If we can't find a way of doing it, then of course it will be cancelled."    

QE was proposing that the Russian government undertake a crude swap with Iran to feed the plant in the UAE with Iranian crude, Otaiba said.

"That would be a better supply arrangement as it would be a government-to-government deal," he added. If Iranian crude were used as a feedstock, QE would look at building a pipeline from southern Iran to the UAE, he added.

The UAE plant would be a joint venture with Russia, he said. QE was talking to both the local government of Chelyabinsk and Russia's federal government on participation, he added.

QE was also considering buying Iraqi crude for the plant, he said, adding plans would be finalised in 2009 and construction could begin in 2010. The plant would take 4-5 years to build.

The refinery would be either in one of the UAE's northern emirates of Ras al-Khaimah, Fujairah or Umm Al-Quwain. If the plant were not in Fujairah, then another pipeline would be built to transport oil products to Fujairah for export, he said.

Fujairah is outside the shipping chokepoint of the Strait of Hormuz, so a pipeline to the port would cut export shipping costs.

Plans for the Russian plant were more advanced, Otaiba said. QE signed a framework agreement with the government of Chelyabinsk in Russia's Urals region for the 180,000-bpd refinery on January 23. The cost of that plant was estimated at $4.5 billion.

It will be 75 percent owned by QE and 25 percent owned by the Chelyabinsk government.

QE and Chelyabinsk are talking to Russian oil companies Lukoil, Rosneft and gas giant Gazprom and others on supplies for that refinery, Otaiba said. It hopes to sign a final deal for the plant in March.

The company had also made contact with both Syrian and Libyan officials about the possibility of building 220,000 bpd refineries in each country, he said.

QE's plans for new refineries come as similar projects worldwide are being threatened by rapidly escalating costs as the energy industry strains to bring online new plants to meet rising demand.

Abu Dhabi's government-owned International Petroleum Investment Co. (IPIC) is also planning to build a new refinery in the United Arab Emirates. The Fujairah refinery was also initially planned to have a capacity of 500,000 bpd, although IPIC officials have since taken plans back to the drawing board due to rising costs.

ConocoPhillips dropped plans to participate in the Fujairah refinery last year.

QE, a relative newcomer to the energy industry, is also planning involvement in petrochemical plants in the Middle East. It plans to take part in joint ventures with international companies that will have around $100 billion of assets in the next three years, Otaiba said.

Otaiba owns 89 percent of QE, which was formed in 2005. The company was in talks with an international bank about its financing options, which could include Islamic bonds, he said. - Reuters