CAPE TOWN - South African state-owned oil company PetroSA expects its 400,000 barrels-per-day Coega oil refinery to cost much less than a forecast $11 billion, PetroSA Chief Executive Sipho Mkhize said on Monday.
"We have seen indications that steel costs are going down, so we hope that all other costs will also follow suit," Mkhize told Reuters. "We foresee a substantial reduction on the input side of the costs."
He would not give more details.
The cost of the refinery, which will be South Africa's largest when it is comes on stream in 2014, soared to $11 billion from $5.85 billion as steel prices rose.
But steel prices have fallen around 50 percent over the past eight months as the global economic outlook deteriorates.
Mkhize said there was appetite to finance the project despite the global financial crisis. Funding would come from PetroSA's own balance sheet as well as international financiers such as export credit agencies, he said.
The refinery, to be built at the deep-water port of Coega in the south-east of South Africa, will have its own gas-fired power station, a boon as the country battles power shortages.
Without Coega's additional refining capacity, South Africa would have to import some 10 billion litres of fuel a year by 2015, adding to a growing current account deficit, Mkhize said.
Earlier on Monday the company awarded U.S-based KBR (KBR.N: Quote, Profile, Research, Stock Buzz) a $98 million engineering contract for the development of the refinery.
KBR's feasibility study was expected to be finalised by September 2009, with construction expected to start after 2010, PetroSA said.
PetroSA said last month half of Coega's output would be exported to sub-Saharan Africa.
"We have seen indications that steel costs are going down, so we hope that all other costs will also follow suit," Mkhize told Reuters. "We foresee a substantial reduction on the input side of the costs."
He would not give more details.
The cost of the refinery, which will be South Africa's largest when it is comes on stream in 2014, soared to $11 billion from $5.85 billion as steel prices rose.
But steel prices have fallen around 50 percent over the past eight months as the global economic outlook deteriorates.
Mkhize said there was appetite to finance the project despite the global financial crisis. Funding would come from PetroSA's own balance sheet as well as international financiers such as export credit agencies, he said.
The refinery, to be built at the deep-water port of Coega in the south-east of South Africa, will have its own gas-fired power station, a boon as the country battles power shortages.
Without Coega's additional refining capacity, South Africa would have to import some 10 billion litres of fuel a year by 2015, adding to a growing current account deficit, Mkhize said.
Earlier on Monday the company awarded U.S-based KBR (KBR.N: Quote, Profile, Research, Stock Buzz) a $98 million engineering contract for the development of the refinery.
KBR's feasibility study was expected to be finalised by September 2009, with construction expected to start after 2010, PetroSA said.
PetroSA said last month half of Coega's output would be exported to sub-Saharan Africa.
