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Petrobras to sell RLAM refinery to Abu Dhabi's Mubadala for $1.65 bil

Highlights

First refinery sale under antitrust deal

Petrobras to restart REPAR sales process

Completes deal to sell 30% of Frade Field

Rio de Janeiro — Brazilian state-led oil company Petrobras agreed to sell the Refinaria Landulpho Alves, or RLAM, in Bahia state to Abu Dhabi's Mubadala Investment for $1.65 billion in the first of what is expected to be eight refinery sales by the end of 2021, Petrobras said Feb. 8.

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"The signing of the sales and purchase contract is still subject to approval by competent bodies," Petrobras said. Petrobras opened a final round of binding offers based on parameters negotiated with Mubadala on Dec. 3.

The deal represents a watershed moment for Brazil's downstream segment and officially ends Petrobras' monopoly in the refining segment. Petrobras currently operates 98% of Brazil's refining capacity, but that total will drop to about 50% after the company completes the sale of eight of its 13 operated refineries by the end of 2021. The refinery sales were ordered under a 2019 deal with the Justice Ministry's Antitrust Division, also known as CADE.

Petrobras will retain five refineries in the country's southeast region, focused on the agricultural and industrial heartlands of Sao Paulo and Rio de Janeiro states. The refineries will primarily produce ULSD, gasoline and low-sulfur bunker fuel.

Brazil wants to use the refinery sales as a way to lure new investors to Brazil's downstream sector, with government officials expecting increased competition across Latin America's biggest economy to result in lower fuel prices for consumers.

Petrobras, however, built and operated the refineries as part of an integrated oil company. That structure means that parameters will have to be put in place during final approvals by regulators to ensure that de facto regional monopolies are handed over to private enterprise.

CADE has already put in place some conditions, including limiting potential buyers from purchasing refineries in the same region.

While the sale of RLAM to Mubadala advanced, the sale of Refinaria Presidente Getulio Vargas, or REPAR, in Parana state suffered a setback, Petrobras said. Petrobras received binding offers for the refinery, but opted to stop the sales process because conditions involved in the offers was "outside Petrobras' economic-financial evaluation," the company said.

Petrobras plans to restart the process to sell REPAR in a timely manner, the company said.

The sales processes for Refinaria Alberto Pasqualini, or REFAP, in Rio Grande do Sul state; Refinaria Isaac Sabba, or REMAN, in Amazonas state; Refinaria Abreu e Lima, also known as Refinaria do Nordeste or RNEST, in Pernambuco state; Refinaria Gabriel Passos, or REGAP, in Minas Gerais state; Lubrificantes e Derivados de Petroleo do Nordeste, or LUBNOR, in Ceara state; and Unidade de Industrializacao do Xisto, or SIX, in Parana state continued in progress, Petrobras said.

Petrobras expects to sign sales contracts for six of the eight refineries by end-2021, according to company officials. Contracts for RNEST and REGAP, however, are expected to be delayed until the first half of 2022 because of the coronavirus pandemic, which limited site visits in 2020, Petrobras said.

Frade Field deal

Petrobras also completed the sale of a 30% minority share in the Frade Field to Petro Rio for about $100 million, the company said in a separate statement Feb. 5. A contingent payment of $20 million should Petro Rio make additional oil discoveries at the field. Petro Rio earlier bought a 70% operating stake in separate deals with Japan's Partex and US heavyweight Chevron Corp.

The deal gives Petro Rio 100% of Frade and clears the way for the company's revitalization project at the field. Petro Rio plans to add four production wells and three injection wells, with the project expected to start in the second half of 2021.

Petrobras also concluded the sale of its fuel-distribution business in Uruguay to Mauruguay SA for $68.2 million, the company said. Petrobras Uruguay Distribucion SA owned and operated a network of 90 service stations, 16 convenience stores and a logistics terminal, among other assets, the company said.

Mauruguay SA is a subsidiary of Spain's Disa Corporacion Petrolifera, which operates Spain's fourth-largest service station network.

Petrobras also started the non-binding phase of talks to sell its 51% controlling stake in pipeline operator Transportadora Brasileira Gasoduto Bolivia-Brasil SA, or TBG and 25% stake in Transportadora Sulbrasileira de Gas SA, the company said Feb. 5. Qualified investors will receive instructions on how to submit non-binding offers, Petrobras said.

TBG operates the 2,593 km Bolivia-Brazil pipeline that exports natural gas from Andean neighbor Bolivia into Brazil. The pipeline has installed capacity to transport 30 million cu m/d.