PetroSA has put in motion its plan to build a R39 billion crude oil refinery in the Coega Industrial Development Zone (IDZ) in Port Elizabeth by awarding a contract for the pre-feasibility study for the project.

South Africa's national oil company and operator of the world's first gas-to-liquid refinery at Mossel Bay, has awarded the contract to the international engineering firm, Kellogg Brown & Root International Inc (KBR).

Speaking at the signing ceremony in Cape Town on Tuesday, PetroSA's Vice-President: New Ventures - Midstream Jorn Falbe explained that the pre-feasibility study focused on determining the economic optimum configuration for the refinery.

These include the crude oil type and costs, the required product slate, prices and specifications and taking the capital and operating costs into consideration.

Thereafter the project will move on to the feasibility phase, which will define the engineering scope of the refinery.

PetroSA said that the pre-feasibility study was expected to take about six months to complete and that it would be conducted out of the KBR offices in Houston, United States of America (USA), offices.

The proposed crude oil refinery, called Project Mthombo, is expected to come on stream in 2014/2015 and to produce more than 200 000 barrels of fuel per day.

PetroSA explained that KBR had a well-established track record in developing downstream projects in the oil industry and had access to global resources and expertise in crude oil refining.

The firm is currently involved with several major international refinery projects in different stages of completion, which are of a similar capacity and processing similar crude oils considered for Project Mthombo by PetroSA, the oil company added.

Mr Falbe also said PetroSA was using the project to develop the skills pool in South Africa. Several promising candidates have been selected from previously disadvantaged backgrounds and will be assigned to KBR for the duration of the study.

"The development of these engineers, who are essential for the successful construction and operation of the refinery, is part of a well-defined strategy by PetroSA in anticipation of future needs," added Mr Falbe.

PetroSA said the awarding of the contract to KBR was linked to PetroSA's strong belief that complementary partnerships would be required to realise a project of that size and nature; to mitigate any project related risk and to ensure the success of the project.

"Project Mthombo underpins South Africa's security of energy supply and reduces South Africa's dependency on imported automotive fuels.

"Project Mthombo, which is nominally sized for 200 000 barrels of fuel per day to satisfy the South African demand, could be expanded to allow for exports or other growth opportunities and could be integrated with downstream Petro-Chemical opportunities," explained PetroSA.

The announcement by PetroSA last week that it was investigating the possibility of building a project at Coega had been warmly received by the Coega Development Corporation.

The spokesperson for the Coega Development Corporation Ongama Mtimka said then that the announcement "reiterates our position that the Coega IDZ is a viable business proposition.

"There are other potential investors who have shown interest in a crude oil refinery in the Coega IDZ," he said.

The Coega project is a multi-billion-rand industrial development complex and deepwater port in Port Elizabeth, Eastern Cape.