Petrobras does not want to sell refineries and is even thinking about building one

In order to open up the market to competition and, at the same time, build cash to reduce the company’s indebtedness, Petrobras has promoted a broad divestment program in recent years. The plan called for the sale of eight of the company’s 13 refineries, of which three were transferred to the private sector.

The government of President Luiz Inácio Lula da Silva (PT), however, intends not only to interrupt the process but to reverse it to some extent, with the aim of rescuing the state-owned company’s refining capacity. The first steps in this direction have already begun to be taken.

The resumption of investment in refineries in Brazil – a hallmark of previous PT administrations, which generated billionaire spending and had irregularities exposed by Operation Lava Jato and the Federal Audit Court (TCU) – was a commitment assumed by Lula during the electoral campaign .

In the government plan filed with the Superior Electoral Court (TSE), the then PT candidate defended a new fuel and cooking gas price policy that was aligned with an increase in the production of oil products in the country.

In the final report of the government transition office, presented in December last year, the sale of refineries was criticized for reducing the space for state action.

The current pricing policy, known by the acronym PPI (import parity price) links the value of derivatives leaving Petrobras refineries to the international price of oil and the logistics costs that importers have to bear.

The objective of the strategy, adopted since 2016, is to keep the market attractive so that private refineries and importers can meet the country’s demand, since, alone, the company is not able to supply all the fuel that Brazilians consume.

Depending on the global reference value of the commodity and the exchange rate, since the indicator is priced in dollars, the state-owned company ends up having to raise prices to levels far above what it could practice, already considering the profit margin.

Opponent of the PPI since its conception, the PT attributes the high prices of fuels to the pricing policy and argues that Brazil would be able to supply all the demand for petroleum products internally if it were not for the lack of investment in refining in Brazilian territory.

On the other hand, liberal economists believe that opening up the refining market to competition would allow for greater investment by the private sector in the segment.

Although the oil industry monopoly in Brazil was overthrown in 1997, in practice Petrobras continued to maintain control of the derivatives market, such as gasoline, diesel oil, cooking gas, aviation kerosene and lubricants.

“Part of the problem of this lack of refining [no Brasil] comes from this monopoly. The private sector is reluctant to invest in this space because it has a state-owned company that can absorb profits”, explained Conrado Magalhães, from Guide Investimentos, recently to People’s Gazette.

Sale of refineries was defined in agreement with Cade in 2019

The state-owned company was even targeted by the Administrative Council for Economic Defense (Cade), which was investigating, in an administrative investigation opened by the Brazilian Association of Fuel Importers (Abicom), alleged abuse of a dominant position in the refining market.

To suspend the investigation, in 2019, during the government of Jair Bolsonaro (PL), the company signed an agreement in which it committed to sell eight oil refineries, in addition to assets related to fuel transportation. The period given for the divestment was two years, but additives extended the validity of the agreement.

By 2021, 13 of the 17 refineries operating in Brazil belonged to Petrobras, which concentrated almost the entire refining market. Between January and September of that year, the refineries of the state-owned company accounted for 98.9% of all oil derivatives production in the country, according to data from the National Agency of Petroleum, Natural Gas and Biofuels (ANP).

In October 2021, ownership of the operation of the Landulpho Alves Refinery (RLAM), in Bahia, was transferred from the state-owned company to the Mataripe Refinery, controlled by Acelen, from the Mubadala fund.

Two other refining units – the Shale Industrialization Unit (SIX), in Paraná, and the Isaac Sabbá Refinery (Reman), in Amazonas – had their sales processes completed on November 4th and 30th of last year.

Petrobras president wants to “review” refineries and says he can decide for a new unit

On the last day 2, in his first teleconference with investors, the president of Petrobras, Jean Paul Prates, said that the company will no longer “necessarily go out selling assets by government decisions”, in reference to the plan to sell refineries.

In his first press conference in office, Prates criticized the PPI and stated that he should review the model from the moment the new executive board and the new board of directors of the company are sworn in, which should occur in April.

In November 2022, the new government’s transition team even requested the suspension of ongoing asset transfer processes. At the time, however, Petrobras released a note denying any decision on the suspension of the divestment program. The completion of the sale of Reman, by the way, occurred after the request of the elected government team.

At the time, as a member of the Mines and Energy group on the transition team, Prates even suggested the possibility of building new refining units. “Petrobras can ‘upgrade’ its refineries, review all the installations that already exist, without acquiring anything new, and also try to expand there”, he said, on November 24, at a press conference.

“If you have to take on works that are unfinished – then yes, in a third instance –, if you decide for a new unit, even so you would have to think about a refinery concept of the future, which will exist for 60, 80 years, and not a new refinery -old.”

The PT’s previous administrations were marked by ambitious plans in the area of ​​refining. The projects consumed tens of billions of reais and had management problems, delays in works and accusations of overbilling and corruption raised by the TCU and Lava Jato.

Of the four large refineries designed by the PT governments, only one was built, and only in part – Abreu e Lima (RNEST), in Pernambuco. The company, which with these investments expected to reach the mark of 3.4 million barrels refined per day in 2015, processed only half of that in the last year – about 1.7 million barrels per day.

Prates proposed a tax on oil exports when he was a senator

In December 2021, when he was still a senator, during the discussion of a bill that provided for the creation of a fuel price stabilization fund for which he was rapporteur, Prates accused Petrobras of “inertia” in defending the process opened by the Abicom together with Cade, which ended up resulting in the commitment to sell the refineries.

“As is known, Petrobras not only failed to present its counterarguments, but immediately rushed to the body presenting a list of eight refineries intended for sale”, he said, at a meeting of the Senate Economic Affairs Committee (CAE). “To this day it is not clear whether this decision was made by the company’s board of directors or was an order given by the controlling shareholder,” he said, referring to the Bolsonaro government.

In discussions of the proposal, the then senator also accused Petrobras of operating its refineries below production capacity, in order to favor fuel importers.

To encourage the refining of oil in Brazilian territory, the bill that Prates reported on provided for the creation of a tax on the export of crude oil, with tax incentives for companies that destined part of the production for the domestic production of derivatives. It would, therefore, serve as a stimulus to the production of derivatives in the country. The tribute ended up being removed from the text after strong opposition among CAE members.

But the subject returned to the scene last Tuesday (28), when the Minister of Finance, Fernando Haddad, announced a 9.2% tax on crude oil export operations.

The new tax, in principle, is temporary, lasting four months, pending confirmation by Congress, and was instituted under the argument of offsetting a lower rate of PIS and Cofins on gasoline and ethanol, whose collection was resumed on the 1st. th of March.

Government asks for suspension of the sale of refineries and reserves part of Petrobras’ dividends for investment

“When we discovered the pre-salt layer, we didn’t want to export crude oil. We wanted to be an exporter of petroleum derivatives”, said Lula in an interview with BandNews FM radio on the 2nd.

On March 1, the Ministry of Mines and Energy asked Petrobras to suspend, for 90 days, the sale of the oil company’s assets, which include gas pipelines, oil and gas production centers and the Northeast Lubricants and Derivatives Refinery. (Lubnor), located in Fortaleza.

Although the Ceará refinery has already been sold, in May 2022, to the company Grepar Participações, the operation is the subject of questioning by local companies and is under analysis by the Cade Court.

Another four refineries are in the company’s divestment plan, now suspended: Gabriel Passos (Regap), in Minas Gerais; Abreu e Lima (Rnest), in Pernambuco; Alberto Pasqualini (Refap), in Rio Grande do Sul; and President Getúlio Vargas (Repar), in Paraná.

On the same day, the 1st, after announcing the record profit of BRL 188.3 billion for the year 2022, Petrobras’ Board of Directors agreed to distribute BRL 35.7 billion in dividends for the fourth quarter, but decided to reserve BRL 6.5 billion for a statutory reserve that can be used for investments.

The allocation depends on approval at the next shareholders’ meeting, scheduled for April 27. As the government is the majority shareholder, there should be no obstacles to the execution of the measure.

The decision to create this reserve seems to respond to pressure from Lula, who has been demanding less dividends from the company and more investments, as part of his plan to expand the State’s role in the economy.

“Petrobras, instead of investing, decided to reward minority shareholders with R$ 215 billion. It had a profit of R$ 195 billion. And how much was Petrobras’ investment? Almost nothing”, said the president the day after the announcement. of the company’s record profit.

A People’s Gazette questioned Petrobras about the strategy of the current management for the refining area, but there was no response until the publication of this report.