Rio de Janeiro — Brazilian state-led oil producer and refiner Petrobras started the sale of four refineries Friday, kicking off plans to end the company's monopoly of the sector and reduce its share of country's refining capacity to 50% under terms of an antitrust agreement.
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"The refining divestments are aligned with the company's portfolio optimization and improvement in capital allocation," Petrobras said in a statement published along with a prospectus for each refinery on sale.
The sales are part of a wider $26.9 billion divestment program for 2019-2023 that includes the company's exit or reduced participation in segments such as biofuels, fertilizers, fuels distribution, logistics and natural gas distribution.
The first phase of refinery sales includes the 115,000 b/d Refinaria do Nordeste, also known as RNEST or Abreu e Lima, in Ipojuca, Pernambuco state; the 376,650 b/d Refinaria Landulpho Alves, or RLAM, in Mataripe, Bahia state; the 208,990 b/d Refinaria Presidente Getulio Vargas, or REPAR, in Araucaria, Parana state; and the 189,600 b/d Refinaria Alberto Pasqualini, or REFAP, in Canoas, Rio Grande do Sul state, Petrobras said.
Each individual refinery sale includes related terminals, pipelines and other infrastructure, Petrobras said. Potential buyers must be oil companies active in crude production, refining, sales, transportation or trading with at least $3.0 billion in 2018 revenues, the company said. Investment funds or other financial groups with at least $1.0 billion under management also are eligible to bid, Petrobras said.
Potential buyers will have until August 16 to confirm interest in participating in the sales, with a September 27 deadline to sign related confidentiality agreements ahead of the start of non-binding negotiations, Petrobras said.
The refinery sales will be completed under requirements laid out in a mid-June agreement between the company and the Justice Ministry's Antitrust Division, known as CADE. CADE mandated that Petrobras sell eight of the company's 13 refineries accounting for about 1.1 million b/d in processing capacity, which represents about 50% of the country's total refining capacity.
Petrobras plans to publish prospectus for the sale of the remaining four refineries outlined in the antitrust agreement before the end of 2019, the company said.
The refineries that will be put up for sale later this year include the 5,880 mt/d Unidade de Industrializacao do Xisto, or SIX, shale-and-bitumen processing facility in Sao Mateus do Sul, Parana; the 144,800 b/d Refinaria Gabriel Passos, or REGAP, in Betim, Minas Gerais; the 43,970 b/d Refinaria Isaac Sabba, or REMAN, in Manaus, Amazonas; and Lubrificantes e Derivados de Petroleo do Nordeste, or LUBNOR, which processes 8,000 b/d in Fortaleza, Ceara.
CADE imposed conditions on the sales that prohibit companies from buying more than one refinery in a specific geographic region, which was outlined in each prospectus. A single company or business entity may not purchase both RLAM and RNEST; both REPAR and REFAP; and both REGAP and RELAM because of each refinery's proximity to the other, according to each sale prospectus.
The sales are expected to generate interest from Asian refiners, which could export refined products back to the region or gain access to high-value markets in the US and Europe, industry officials told S&P Global Platts. China's CNPC is currently in talks with Petrobras to conclude construction on the 85%-complete Complexo Petroquimico do Rio de Janeiro, or Comperj, with a decision expected later this year. The deal may also include CNPC's participation in refineries in Brazil's southeast region.
Major integrated oil companies, however, have been less enthusiastic, according to industry officials with knowledge of the sector. Shell, for example, wrapped its Brazilian distribution assets into the Raizen joint venture with sugar-and-ethanol producer Cosan earlier this decade.
The refinery sales are complicated by concerns about government meddling in fuel prices. Potential investors will want assurances that free-market pricing principles, which are supported by the current government, won't be undermined in the future, industry officials said.
Brazil expects the refinery sales to increase competition and eventually lead to lower diesel and gasoline prices for consumers. Petrobras currently controls 98% of Brazil's refining capacity.
NATURAL GAS DIVESTMENTS
The government is also opening up the country's natural gas industry in an effort to make the fuel cheaper for industrial and residential clients, with Petrobras planning to be an active participant, Chief Executive Roberto Castello Branco said during an event late Thursday. The company is currently in talks with CADE that will end Petrobras' monopoly in natural gas distribution, Castello Branco said.
Petrobras started the process with the recent sales of gas-pipeline operators Transportadora Asociada de Gas, or TAG, and Nova Transportadora do Sudeste, or NTS, in separate deals that raised nearly $14 billion for the company, the executive noted.
"We're going to expand the sale of gas pipelines," Castello Branco said. "We're going to exit natural gas distribution and agree to other measures currently being discussed with CADE."
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