Under Lula, Petrobras steps back in refinery privatization process

Started two years ago, during the government of Jair Bolsonaro (PL), the privatization process of eight of the 13 refineries in which Petrobras participated could be abandoned once and for all and even undone under the administration of Luiz Inácio Lula da Silva (PT).

After the Ministry of Mines and Energy suspended the sale of the oil company’s assets at the beginning of the year, in November the state-owned company decided to cancel a contract already signed to transfer control of a refinery. At the same time, the company asked the Administrative Council for Economic Defense (Cade) to renegotiate a term of cessation commitment (TCC) in which it had committed to reducing its participation in the refining market.

The agreement, created during the mandate of Michel Temer (MDB), was signed by Petrobras to suspend an administrative inquiry in which Cade was investigating alleged abuse of a dominant position in the sector. Signed in June 2019, the document established a two-year interval for the divestment process, but amendments extended the deadline.

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

After the signing of the TCC, four refining units were negotiated. 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.

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.

The sale of the Lubrificantes e Derivados de Petróleo do Nordeste Refinery (Lubnor) to the Grepar Participações consortium was agreed with Petrobras in May last year, but since the transaction was approved by Cade, on June 22 of this year, the state-owned company had been postponing the conclusion of the deal.

On the 27th, the company announced the decision to terminate the contract, alleging, in a statement, “lack of compliance with Conditions Precedent established therein until the Final Deadline defined in such contract (11/25/2023), despite the best efforts undertaken by Petrobras to complete the transaction”.

Located in Fortaleza, the unit has an authorized processing capacity of 8,200 barrels/day and is one of the national leaders in asphalt production and the only one to produce naphthenic lubricants. The deal had been closed for US$34 million.

In a statement, Grepar said it was taken by surprise by the decision and stated that it will adopt “legal measures to protect its rights to be compensated for the losses and damages that Petrobras deliberately caused it, frustrating business already contracted”.

Government evaluates repurchase of already privatized refineries

The government’s interest in maintaining dominance of the refining market may not stop there. The Minister of Mines and Energy, Alexandre Silveira, has already defended, on several occasions, the repurchase of refineries already transferred to the private sector.

At the end of September, he said that this would be a way to reduce dependence on imported diesel.

“We are working on several fronts for this. One is to reinforce our public policy interest, for Petrobras to be quick to modernize its refining parks and to evaluate the possibility, my opinion is already public, that Petrobras should negotiate with those refineries that were privatized to that, within market rules – because we want to respect legal security, regulatory stability – it can reacquire these refineries”, he said.

At the beginning of the same month, in a note released by the Ministry of Mines and Energy (MME), Silveira had already specifically defended the repurchase of RLAM.

“We understand from the point of view of energy security and the new geopolitics of the oil and gas sector, respecting the company’s governance rules, that Petrobras must evaluate the repurchase of RLAM. It is a historic asset that was part of the strategy to dismantle the Petrobras System and should never have been sold,” he declared.

In May, during an event in Salvador, he had already raised this possibility. “The largest refinery in Bahia was sold to private capital. Personally, if it depends on the Minister of Mines and Energy, on his wishes as a Brazilian citizen, but in love with Bahia, this refinery should once again belong to Petrobras,” he said.

The other four refineries that were in the company’s divestment plan were Gabriel Passos (Regap), in Minas Gerais; Abreu e Lima (RNEST), in Pernambuco; to Alberto Pasqualini (Refap), in Rio Grande do Sul; and President Getúlio Vargas (Repar), in Paraná.

The resumption of investment in refineries in Brazil – a hallmark of previous PT administrations, which generated billion-dollar expenses and had irregularities exposed by Operation Lava Jato and the Federal Court of Auditors (TCU) – was a commitment made by Lula during the election campaign .

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 statement denying any decision on suspending the divestment program. The completion of the sale of Reman, in fact, occurred after the request of the elected government team.

At the time, as a member of the Mines and Energy group of the transition team, under the company’s current president, Jean Paul Prates, former PT senator, he even raised the possibility of building new refining units.

In the government plan filed with the Superior Electoral Court (TSE) in 2022, the then PT candidate defended a new fuel and cooking gas price policy that was aligned with an increase in the production of petroleum derivatives 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.

In May this year, Petrobras announced the end of the import parity price regime, known by the acronym PPI and which had been in force since 2016.

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 allegations of overpricing and corruption raised by the TCU and Lava Jato.

Of the four large refineries designed under PT governments, only Abreu e Lima (RNEST), in Pernambuco, was built and only in part. 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 last year – around 1.7 million barrels per day.