May 27, 2008 (DUBAI) — Soaring costs have delayed a refinery project in Sudan, which Malaysian state oil firm Petronas [PETR.UL] has been poised to win, an official from Sudanese state oil firm Sudapet said.

The planned 100,000 barrels per day oil refinery at Port Sudan is estimated to cost $5 billion, up from original estimates of between $1 billion to $2 billion.

"The issue is finance," said Salih Gaffar Mohamed, Sudapet’s general manager.

"The cost is getting higher and higher ... it has increased from about $2 billion to $ 5 billion from the first bid submission. It is in the process of being finalised," Mohamed told Reuters on the sidelines of an energy conference in Dubai.

Petronas, one of Sudan’s biggest oil producers, signed a deal in 2005 to invest in the refinery.

Sudan’s junior oil minister had said in India in January last year that construction had started and they hoped to complete the plant within two years.

Mohamed said Sudan’s largest refinery in Khartoum, which is undergoing major maintenance, would be fully operational by the end of June.

The newer part of the refinery was closed for maintenance in early May reducing capacity by half, industry sources and stakeholder CNPC said earlier this month.

Sudan, which has four refineries with a total capacity of 142,000 bpd, is producing between 500,000 to 470,000 bpd of crude oil, Mohamed said.

(Reuters)