Project could generate up to 600 MW of extra power which could sold off to local industry and communities.

South African state-owned oil company PetroSA's planned 400 000 barrels-per-day crude oil refinery could generate up to 800 MW of power to ease the country's electricity shortages, an official said on Tuesday.

Jorn Falbe, vice-president of PetroSA's new midstream ventures, said a feasibility study for the refinery at Coega, an industrial zone on South Africa's south-east coast, was due to be completed by August.

Backed by the government, the Coega refinery is expected to ease the country's dependence on fuel imports.

"The refinery will bring the fuel, there is a plan to improve water supply through a desalination plant and we are investigating the concept to convert petcoke to generate up to 800 MW of power," Falbe told Reuters in an interview.

Falbe said the refinery itself would need some 200 MW to operate, but the rest could be used to supply local industry and communities.

The national electricity grid nearly collapsed last January when demand exceeded capacity, bringing big industries to a standstill for five days.

Falbe said the global financial crisis has had little impact, and even made services more easily available and lowered costs after prices for steel products slumped in recent months.

The total cost for the refinery, due to come onstream in 2015, is now estimated at $9-10 billion, down from a previous estimate of $11-billion.

Falbe said the company was confident it would be able to raise the money it needs, once the final investment decision is made by early 2011, either through equity stakes, partnerships and by sourcing funds in the international credit markets.

"We've engaged with various credit agencies and the response has been positive ... our financial advisors, the HSBC, think it's still feasible," he said.

Falbe said PetroSA was also studying, along with South Africa's logistics group Transnet , the possibility of building an alternative fuel pipeline for South Africa, to ease congestion on the Durban-Johannesburg line.

The refinery is expected to save South Africa around R18,5-billion a year in imports.

Half of the refinery's output is also expected to supply sub-Saharan Africa.

"There are many refineries in the region which are small and uncompetitive; people are talking about new plants, but no one is building one... Sub-Saharan Africa is exporting crude and imports the finished product, which means there is a natural market for a refinery," Falbe said.

The Coega refinery project will create some 18 500 permanent jobs in the Eastern Cape province, one of the country's least developed regions, Falbe said.