MOSCOW (MRC) -- Brazilian group Ultrapar Participacoes SA offered the highest price for Petrobras’ refinery Refap and is leading talks to acquire the facility in the southern state of Rio Grande do Sul, reported Reuters with reference to three people close to the matter.
Brazil has been trying sell eight refineries, which would end Petrobras’s virtual monopoly in the country’s refining sector and open one of the world’s largest fuel markets to private investors. Petrobras is currently negotiating five of them with the highest bidders.
Petroleo Brasileiro SA, as the state-controlled producer is known, is trying to get Ultrapar to boost its offer before agreeing to exclusive talks, three of the people said. Offers below Petrobras’s initial price range have made the company miss its internal deadline to sign a deal by the end of 2020.
Petrobras and Ultra declined to comment.
Raizen, a joint venture between Royal Dutch Shell PLC and Brazilian ethanol producer Cosan SA, has also bid for Refap, two of the people said. A second round of offers hasn’t been ruled out, the people said.
Raizen declined to comment.
Indian conglomerate Essar Group, which had pre-qualified for the binding phase, dropped out of the competition, the people said.
Ultrapar and Raizen have also bid for refinery Repar, which supplies the relatively affluent states of Parana, Santa Catarina, Sao Paulo and Mato Grosso. Petrobras has hesitated to designate a winning bidder because it considers the prices too low, three of the people said.
Refap and Repar are located in Brazil’s southern region and have a production capacity of 200,000 barrels per day each, or about 18% of the country’s capacity.
Antitrust rules would bar Petrobras from selling the units to the same firm.
Elsewhere, Petrobras is in exclusive talks with Abu Dhabi investor Mubadala Investment Co to sell its Bahia unit RLAM. Those talks, at a more advanced stage, could bring a deal as soon as this month, two of the people said.
The producer is also negotiating the sale of its REMAN, LUBNOR and SIX refining units, one of the people said. No exclusivity was set, which allows rebids, the person said.
Petrobras has been trying to sell refineries for almost a decade with no success, facing resistance from politicians, union workers and local contractors. A history of government fuel price intervention has also scared away investors in the past.
Chief Executive Roberto Castello Branco, who took office in January 2019 appointed by president Jair Bolsonaro, relaunched the process as part of a plan to focus on deep-water exploration and cut debt.
On December 2019, Petrobras signed an agreement with antitrust watchdog Cade to privatize eight refineries, or about half of Brazil’s fuel production capacity, by Dec. 2021. Petrobras has told potential buyers it is not obliged to sell the plants if offers fall below its internal price range.
A decrease in fuel demand accelerated by the Covid-19 pandemic is a key reason behind the price gap between Petrobras and potential buyers, three of the people said.
The sales will also allow Petrobras to raise fresh money and reduce debt.
As MRC informed before, Brazil’s state-run oil company Petrobras is seeking 800 million reais (USD152 million) in compensation from engineering group Odebrecht in arbitration proceedings over its alleged violation of the shareholders agreement in petrochemical company Braskem.
We remind that Petrobras may need more than a year to divest its stake in Braskem, said Andrea Almeida, Petrobras CFO, in early July, 2020. She said during the company's recent webinar that Petrobras plans to give more time for potential investors to make offers for the company"s assets, including for its refineries and stakes at its petrochemical and fuel distribution affiliates. The divestment of Petrobras's stake in Braskem in 2020 would be desirable but "might not be possible" as the COVID-19 pandemic has changed market conditions, she said. The company plans to close part of its refinery sales in 2021. In December, Roberto Castello Branco, CEO of Petrobras, said that he wants to sell the company's stake in Braskem within a year. Petrobras owns 32.15% of Braskem.
We also remind that Braskem is no longer pursuing a petrochemical project, which would have included an ethane cracker, in West Virginia. And the company is seeking to sell the land that would have housed the cracker. The project, announced in 2013, had been on Braskem's back burner for several years.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's DataScope report, PE imports to Russia decreased in January-November 2020 by 17% year on year and reached 569,900 tonnes. High density polyethylene (HDPE) accounted for the greatest reduction in imports. At the same time, PP imports into Russia increased by 21% year on year to about 202,000 tonnes in the first eleven months of 2020. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
Headquartered in Rio de Janeiro, Petrobras is an integrated energy firm. Petrobras" activities include exploration, exploitation and production of oil from reservoir wells, shale and other rocks as well as refining, processing, trade and transport of oil and oil products, natural gas and other fluid hydrocarbons, in addition to other energy-related activities.