Brazil's Petrobras signs raw-material supply contracts with Braskem

Rio de Janeiro — Brazilian state-led oil company Petrobras agreed to supply petrochemicals company Braskem with naphtha, ethane, and propane over the next five years, Petrobras said in a Dec. 22 statement.

The supply contracts came amid a dispute between Braskem's controlling shareholders, Odebrecht and Petrobras, with Odebrecht's current bankruptcy-protection case complicating the petrochemical company's fate.

But Braskem said Dec. 7 that Odebrecht had informed the company it was in the process of preparing to sell its 38.3% controlling stake in first-quarter 2021. Odebrecht has until July 2023 to complete the sale, which is part of its bankruptcy-recovery plan.

Petrobras and Odebrecht have been in contentious talks for years about the sale of Braskem, with Petrobras also pushing for improved governance measures. Better governance would help boost the price of Braskem shares, Petrobras officials have said. Petrobras owns a 36.1% stake in Braskem but wants to sell its shares as it exits non-core industries such as petrochemicals, biofuels, and fertilizers as part of a $25 billion-$35 billion divestment program for 2021-2025.

Under terms of the supply agreement, Petrobras will deliver about 2 million mt of naphtha to Braskem's São Paulo manufacturing facility, Petrobras said. The contract, which will run from Dec. 23, 2020, until Dec. 31, 2025, was valued at $3.7 billion, according to Petrobras.

In addition, Petrobras will supply about $1.5 billion worth of ethane and propane to Braskem's Rio de Janeiro facilities, the company said. The contract will run from Jan. 1, 2021, until Dec. 31, 2025, Petrobras said. The total volume of ethane and propane together was estimated at about 580,000 mt, or equivalent to Braskem's annual ethylene output, Petrobras said.

"The contract prices are based on international reference prices," Petrobras said.

Pipelines listed

In a separate move made Dec. 23, Petrobras released teasers to sell its 51% stake in Transportadora Brasileira Gasoduto Bolivia-Brasil, or TBG, and its 25% stake in Transportadora Sulbrasileira de Gas SA, or TSB. Petrobras is in the process of exiting the natural gas-logistics business, selling down its stakes in pipelines across the country as part of an antitrust agreement that will see Petrobras end its monopoly in Brazil's natural gas industry.

Petrobras previously sold 90% stakes in pipeline operators Transportadora Associada de Gas, or TAG, and Nova Transportadora do Sudeste, or NTS. The remaining 10% stakes will also be sold under the deal with the Justice Ministry's Antitrust Division, or CADE.

Petrobras also opened access to offshore gas-export pipelines and onshore gas-processing plants as part of the antitrust deal.

The biggest prize is TBG, which has installed capacity to import 30 million cubic meters/day from neighboring Bolivia as well as an additional 5.2 million cu m/d capacity in a smaller tranche in São Paulo state. France's Total retains 29%, while EIG Global Energy Partners hold 8%, and Bolivia's YPFB 12%.

The Gasoduto Bolivia Brasil traverses 3,150 kilometers across Bolivia and Brazil, with 2,593 km of that extension in Brazil. The pipeline was built in the late 1990s, with the north and south tranches starting operations in 1999 and 2000, respectively. A second southern extension started operating in 2010.

The initial contracts covering transportation capacity were signed in 1999 and ran for 20 years. Under the antitrust agreement, Petrobras has released or will release much of its capacity for third-party use.

TSB, meanwhile, operates 50 km of pipeline in Rio Grande do Sul and plans to build an additional 565-km tranche that would connect gas fields in Argentina to TBG and the Brazilian city of Porto Alegre, according to the teaser.

France's Total, Spain's Repsol and local fuel distributor Ipiranga each retain 25% stakes in TBS.