Abu Dhabi's International Petroleum Investment Company (IPIC) said on Monday it has set up a joint venture firm with Oman Oil Company (OOC) to develop a 230,000 barrels per day oil refinery to be completed by 2017 in Duqm, on the east coast of Oman.

The IPIC statement did not place a value on the investment.

Two sources familiar with the matter told Reuters the investment outlay in the project is $6 billion with both companies sharing it equally.

The government has earmarked Duqm as the next industrial growth city, with investments of up to $15 billion planned in new petrochemical and infrastructure projects at the port over the next 10 years.

'It will play a vital role in supporting the oil and petrochemical industries in Oman due to the strategic location of the Duqm area, adjacent to one of the world's key shipping trade routes,' Nasser bin Khamis Al Jashmi, under-secretary of Oman's ministry of oil & gas and chairman of OOC said.

The Omani port of Sohar, outside the strategically important Straits of Hormuz - where tensions between Iran and the West have been rising - has seen rapid growth in oil storage and shipping over the last few years.

The second phase of the project will include the development of a petrochemical complex, IPIC said. The new firm, Duqm Refinery & Petrochemical Industries LLC is owned 50:50 by the two companies.

Abu Dhabi government;s investment vehicle IPIC is also building a refinery in Fujairah in the United Arab Emirates at a cost of $3 to $3.5 billion. The project is in the pre-FEED (Front End Engineering & Design) stage.-Reuters