Eugenio Silva, a senior Petromoc official, told Reuters the project would create about 800 jobs and lead to a maximum annual production of 226 million litres of ethanol and biodiesel seven years after start-up.

Sugar cane and jatropha, a drought-resistant shrub, will be planted on some 74,000 hectares of land as part of the joint project with Cofamosa, which represents some 200 Mozambican and South African farmers, Silva said.

"There are so many components which include (a) plantation, the building of a totally new infrastructure and processing of raw material," he said, adding that Petromoc intended to get funding for the project from international donors and investors.

The proposed development will be located in Corrumane, about 100 kilometres south-west of the capital Maputo and could help ease an energy crunch in Mozambique, which has enjoyed an economic boom since the end of a 17-year civil war in 1992.

The former Portuguese colony has limited energy supplies, making it reliant on foreign oil and gas. Rising petrol prices have pinched Mozambican consumers and prompted fears that the nation's economic growth could slow.

The government has responded by broadening its search for new energy sources to include bio-fuel development.

Officials have suggested that jatropha, ricin, african palm, and coconuts, all of which grow abundantly in Mozambique, could provide the raw material for bio-diesels, while sugar cane, maize and cassava could be used to produce ethanol.

Mozambique also hopes to be able to export bio-fuels to neighbouring African nations and further afield.

Petromoc, which is 80% owned by the government and 20% owned by employees, operates 119 petrol stations in the country and has 35% of the domestic energy market.

Published: 30 August 2007 17:25 GMT  | Last updated: 30 August 2007 17:25 GMT