Ineos, the troubled chemicals group that is Britain's largest private company, has shelved plans for a $400 million (£294 million) expansion of one of its European petrochemical plants in the latest sign that the debt-laden conglomerate built by Jim Ratcliffe, the billionaire, is under strain.

Ineos had planned to build a gas separation plant at Bamble, close to its Rafnes site in Norway, where it already operates a cracker that makes the basic material for plastic.

This month, it jettisoned the plan as part of broader efforts to cut costs to cope with a steep downturn in the industry. “The project was not economically feasible,” a spokesman for the company said, adding that Ineos remained committed to the Rafnes site and would continue to invest in it and plans to expand an existing cracker facility.

The decision by Ineos not to build the gas separation plant will have a knock-on effect on the Skanled natural gas pipeline, which was designed to link gas production in the Norwegian North Sea with consumers in Denmark and Sweden. The project will proceed, but construction will be delayed and it will be re-routed and re-engineered, a spokesman for Gassco, the Norwegian company overseeing Skanled, said. Ineos acquired the Rafnes petrochemicals business when it bought Norsk Hydro's polymers business in 2007, a deal that it completed last year.

At the end of last year, Ineos was forced to abandon plans for four new European biodiesel plants.

With debts of more than $7billion, the company was in talks with lenders about a waiver of its banking covenants. It is now on track to meet them in 2009.

However, on Friday, Standard & Poor's, the debt ratings agency, downgraded the group's long-term rating and assigned the troubled company a “negative” outlook.

The ratings agency cut its long-term corporate rating to CCC from its previous B rating. It added that ratings could come under further pressure if Ineos fails to renegotiate new long-term covenant agreements in April.

“We see a risk that these negotiations could also include some debt restructuring,” Lucas Sevenin, a credit analyst at Standard & Poor's, said.

Ineos, which had experienced explosive, debt-fuelled growth until the present downturn, is the world's third-largest chemical company and employs 16,000 people.

It operates 70 sites worldwide and has absorbed businesses previously owned by BASF, Bayer, Borealis, BP, Degussa, Dow, Enichem, Hoechst, ICI, Norsk Hydro and Unilever.

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