BP, the oil giant, has put plans for a £320 million liquefied natural gas (LNG) terminal at Galveston in Texas on hold. The location would have been just 10 miles from its Texas City refinery which killed 15 in an explosion almost a year ago.

The move comes just weeks after the group was forced to shutdown part of its co-owned Prudhoe Bay field in Alaska, North America's largest oil field.

A spokesman for BP said the decision to shelve plans for the Texas LNG terminal had been made on economic grounds, insisting that the move had not been influenced by local politics.

However the plans had caused some controversy among residents and environmentalists in neighbouring areas, with support from locals caught up in the Texas City blast.

The prospect of a new terminal won some favour among locals and officials as it would have created 80 jobs and increased the level of traffic using the Port of Galveston.

BP said it would renew its lease option on the 185-acre Pelican Island site it had earmarked for the terminal for a third and final year while it considers the site's economic viability.

The company is looking to take a stake in the strong demand for gas in the United States, where domestic production is falling short of demand.

LNG terminals help bypass the huge cost of developing new pipelines between gas producing countries and where demand exceeds domestic supply. Natural gas is cooled to turn it from gas to liquid, allowing it to be transported by ship, rather than by pipeline.

There are currently four LNG terminals running in the US, with proposals for a further 40, raising fears that the development of too many terminals could flood the market with gas and push down prices.

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