Authorities warn that a massive fire at an electrical substation south of Sydney could continue burning for days, after a transformer and one thousand litres of oil caught alight on Saturday afternoon.

Authorities expect a massive fire at an electrical substation south of Sydney to burn for days after a transformer at the facility caught alight on Saturday afternoon.

The fire which is being fueled by one thousand litres of oil started at the Transgrid substation at Yallah, near Albion Park at about 3pm.

More than 60 firefighters and two mobile command centers were deployed to battle the blaze, which was contained on Saturday evening.

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Fire and Rescue NSW urged thousands of residents in impacted areas of Wollongong and Unanderra to stay indoors as a dense plume of black smoke impacted the Illawarra.

"There is a fire and multiple explosions in one of the large substations on site. Approximately 1000 litres of oil is currently being contained," a FRNSW spokesperson said in a statement.

"High-voltage power lines are also being impacted by the blaze.

Yallah | Power Station Fire: Fire and Rescue NSW (FRNSW) is responding to a large substation fire in Yallah, near Albion Park, on the State’s South Coast. More than 60 firefight... https://t.co/l2pvJiyMpn

"One transformer is fully alight with a second transformer at risk. The company is attempting to stage a shutdown of the facility

"One FRNSW crew is providing fire protection for the on-site specialists.

"The large smoke plume is affecting Wollongong and Unanderra, causing flights in and out of Shellharbour Airport to be delayed.

YALLAH | #FRNSW Update 1 - Large volumes of smoke from the fire are impacting the Wollongong and Unanderra areas. Residents are urged to stay indoors with windows and doors closed until the air quality has improved. #StaySafe

"Residents are urged to stay indoors with windows and doors closed until the air quality has improved."

Transgrid the owner of the substation has confirmed it has diverted power from the site, so nearby homes won’t be hit with blackouts.