The Coega Development Corporation (CDC) said on Thursday that all indications proved positive that the $11-billion greenfield Mthombo refinery project, in the Eastern Cape, would get the go-ahead for construction to start in 2012.

Speaking at a media briefing in Johannesburg, CDC business development manager Khwezi Tiya said that the PetroSA oil refinery project would transform the socio-economic climate in the province. "We are very pleased that the province was selected as the most preferred destination for the Mthombo project."

He noted that the construction of the 360 000-bl/d refinery was directly in line government's ambitions of securing energy supply, producing cleaner fuels and promoting job creation in South Africa.

"The unemployment rate in the Eastern Cape at 27,5% is consistently above national rates of unemployment, however, the Mthombo refinery is of such a scale that it will serve as a vital economic catalyst and contribute significantly to restoring the Eastern Cape's employment and growth patterns to match those of other regions of the country."

Economic studies had shown that household income in the Eastern Cape could rise by around R1,8-billion a year by direct and indirect impacts during the construction phase of the project, while it was estimated that the figure would increase to around R2,1-billion a year when the refinery went into operation.

In total, the project would give rise to around 46 000 jobs during the construction and operational phases.

The project was recently voted one of the Top 100 influential infrastructure projects in the world by KPMG, owing to the high socio-economic impact that it would have in one of South Africa's poorest provinces.

Further, Tiya pointed out that current refineries in South Africa were more than 50-years old and said that the country would benefit from new processes and the production of cleaner fuels, especially in its ambitions to cut back on greenhouse gas emissions.

He also emphasised that the refinery would secure the country's future fuel needs, and that excess production would be sold off to sub-Saharan African countries, that were currently closing down their refining capacity.

Once completed, the crude oil refinery would be the biggest in Africa and would reduce South Africa's reliance on oil imports.

Tiya said that without the Mthombo refinery, South Africa would have to import around 200 000 bl/d or 20% of its oil consumption by 2015.

"It is important to note that studies on the viability of this project has been done mindful of the country's current refining capacity, and Mthombo will be complimentary to this," he added.

Nevertheless, the project has been faced with some opposition from other companies with current refining facilities and ambitions.

Oil major BP Africa had previously said that given the magnitude of the proposed Eastern Cape project all options should be carefully considered, while coal-to-liquids group Sasol had its own inland 80 000-bl/d refinery aspirations in the Limpopo province.

Meanwhile, about R200-million had already been spent on completing a feasibility study for the project, and the company now needed an additional R2,4-billion to complete front-end engineering and design (Feed) study that would take around 18 months.

Tiya said that the go-ahead to enter the Feed phase was expected in the next three months, after which a final investment decision from the government would be needed to progress towards the construction of Mthombo.

He added that the environmental-impact assessment would also be carried out in parallel with the Feed process. "The construction of the refinery will take about three years, so we hope for it to come on stream in 2015."

Investment for the project would be sourced from equity, debt and possibly signing on additional partners to the project. Tiya expected that the project would easily draw investment from local and international markets, despite labour, electricity and logistics concerns.

"Coega is addressing the issue of skills and will be spending around $3-billion, or 30%, of the budgeted price-tag of the refinery on skills development and we are also in the process of developing required and additional infrastructure to support the development of the Mthombo project."

On the issue of electricity uncertainties, Tiya said that investors were mainly concerned about the security of electricity supply and not on pricing. However, most of them were reassured in terms of State-owned power utility Eskom's long-term commitment to deal with the issue, he added.

The CDC pointed out that a further off-spin benefit of the project would include the 800 MW electricity that it would generate through a pet-coke power plant facility, of which 600 MW would be available to the national grid.

Mthombo would also produce desalinated water for its own use that would relieve the pressure on natural water resources in the Eastern Cape.