Petrobras will reduce fuel prices to offset increases in fuels taxes

Brazil's state-run oil giant Petrobras said on Tuesday it will reduce gasoline and diesel prices at its refineries from Wednesday, a move that will likely offset the resumption of federal taxes levied on fuels, said Hydrocarbonprocessing.

Shares in the company dropped sharply after the news, trading down more than 3% by midday and making Petrobras one of the biggest fallers on the local benchmark stock index Bovespa , which slipped 0.5%. The price cut comes as the government announced on Monday it was set to resume the collection of taxes on fuels, ending a waiver set by former President Jair Bolsonaro last year - a measure that will boost government revenues but is seen as upsetting the middle class.

Brazil's finance ministry had already stated earlier in the day that cutting Petrobras prices was being considered as a way to counterbalance the effect of the tax increase, confirming a Reuters report citing sources. Petroleo Brasileiro SA, as the oil firm is formally known, said in a statement on its website it will lower average gasoline prices by nearly 4%, while diesel prices will be reduced by roughly 2%.

Gasoline will now be sold at 3.18 reais (USD0.6103) per liter, down from 3.31 reais, and diesel at 4.02 reais, against 4.10 reais earlier, the company said, adding the move was aimed at keeping local markets "in balance" with global rates.

The announcement came minutes after Brazil's government said Finance Minister Fernando Haddad would provide details on plans for fuel taxes in a press conference at 7 p.m. local time (2200 GMT). "We are still waiting for more information about the tax resumption to see if the net effect (of Petrobras' price cut) will be really negative," said Guilherme Sousa, an economist at Ativa Investimentos.

The ministry had announced on Monday it would reimpose taxes on gasoline and ethanol, but that the rate on the fossil fuel would be higher than that levied on the biofuel. The government, nonetheless, would still recover 100% of tax revenues that had been waived since 2022, it added.

Reuters reported earlier on Tuesday that the government and Petrobras had opened discussions on the possibility of the company cutting its own prices as a way of offsetting the impact on consumers' pockets. According to two sources familiar with the matter, who asked not to be named, the parties saw room for the firm to reduce both gasoline and diesel prices as local rates have been higher than those in international markets.

"There is room for compensation within the import parity policy," one of the sources said, referring to Petrobras' official policy of tracking international rates such as global fuel prices and foreign exchange.

We remind, Petroleo Brasileiro SA stepped up security at its refineries in a precautionary measure after threats against assets, including Brazil's biggest fuel plant. The threats were detected by Petrobras' intelligence unit monitoring social media communications of supporters of Brazil's far-right former President Jair Bolsonaro, the two people said. The state-controlled company said on Sunday night all its assets and refineries were operating normally.

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Oil giant Saudi Aramco has agreed to take a minority stake in a new powertrain engine company that French car maker Renault SA and China's Geely Automobile Holdings Ltd plan to set up jointly, said Hydrocarbonprocessing.

A report in January said that Aramco has been involved in advanced discussions to take a stake of up to 20% in a previously announced but still-unnamed Geely-Renault powertrain company that would develop and supply internal combustion engines (ICE) and hybrid technologies.

They said on Thursday Geely and Renault are expected to retain equal equity stakes in the new independent entity, but did not disclose how much each would own and how much Aramco would invest. The new joint venture is aimed at developing more-efficient gasoline engines and hybrid systems at a time when the focus of much of the automobile industry has been on the capital-intensive transition to purely electric vehicles.

"This partnership with Aramco will... give it a head start in the race towards ultra-low-emissions ICE powertrain technology," Renault CEO Luca de Meo said in the statement. By carving out its internal combustion engine business, Renault plans to focus on electric cars, part of the French automaker's broad restructuring that also involves overhauling its decades-old alliance with Nissan Motor Co.

"Aramco’s entry brings to the table unique know-how that will help develop breakthrough innovations in the fields of synthetic fuels and hydrogen," De Meo said. The deal would make Aramco the first major oil producer to invest in the car business, as the rise of electric cars threatens to cut demand for conventional fuels.

Last year, Aramco announced a partnership with Hyundai Motor Co to study advanced fuels that could be used in hybrid engines to reduce CO2 emissions. For Geely, the deal with Renault extends its pattern of building partnerships to expand beyond China. Geely previously announced a hybrid gasoline engine development deal with Mercedes-Benz and holds a stake in the German automaker.

The new company would have an annual production capacity of more than 5 million internal combustion, hybrid and plug-in hybrid engines and transmissions per year, the companies said.

We remind, the Ministry of Investment of Saudi Arabia has inked an agreement worth $1 bn with UPL Ltd to produce specialized agriculture chemicals within the Kingdom.

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Russia's revenues from oil and gas exports dropped by nearly 40% in January as price caps and Western sanctions squeezed the proceeds from Moscow's most lucrative export, said Hydrocarbonprocessing.

Russia's oil and gas export revenues were USD18.5 billion in January, 38% lower than the USD30 billion Moscow received in January 2022, a month before its invasion of Ukraine, according to IEA numbers shared with Reuters. IEA Executive Director Fatih Birol said Western measures targeting Russian energy exports had achieved their aims of stabilizing oil markets and reducing Moscow's revenues from oil and gas exports.

"Our expectation is that this oil and gas revenue decline will be steeper in the next months to come. And even more steep in the mid-term, as a result of the lack of access to technology and investment," Birol told Reuters. International restrictions imposed on Russia in response to the Ukraine war, including a USD60 a barrel crude price cap imposed by Group of Seven countries, have left Russia's Urals blend being sold at a heavy discount to Brent.

The 27-country European Union also banned Russian seaborne oil imports from December, and has placed sanctions on exports to Russia of technologies needed for oil refining. The United States and Britain have also imposed restrictions on Russian oil imports.

Moscow relies on income from oil and gas - last year around 11.6 trillion roubles (USD154.68 billion) - to fund its budget spending, and has been forced to start selling international reserves to cover a deficit widened by the cost of its invasion of Ukraine.

Europe is meanwhile racing to wean itself off Russian gas, after Moscow cut pipeline deliveries to the EU following its Feb. 2022 invasion of Ukraine. That pushed European gas prices to record highs and left countries struggling to find alternative supplies and launch energy-saving measures. Birol said EU countries made progress in improving energy security last year, including a rapid expansion of renewable energy and heat pumps to reduce the need for fossil fuels.

But he said risks remain, and countries needed to keep up efforts to save energy and safeguard supplies. Europe's ability to secure enough gas could be challenged by rising demand from China, or if Russia cuts off the gas it still sends to Europe.

We remind, Russia's crude oil exports to the European Union in January fell to around 600,000 barrels per day (bpd) from 1 million bpd in December as seaborne volumes dried up except to Bulgaria, International Energy Agency (IEA) data showed. The EU imposed a ban on seaborne Russian crude oil imports from Dec. 5 and G7 countries set a price cap on Russian seaborne exports at USD60 per barrel over Russia's invasion of Ukraine in February 2022. Bulgaria has secured a two-year exemption from the ban.

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Egypt raised domestic gasoline prices early on Thursday, bringing them more in line with global levels but risking further public discontent after a year of rising inflation, a weakening currency and a series of austerity measures, said Hydrocarbonprocessing.

The North African nation reaffirmed its commitment to push through fuel price increases to receive a financial support package agreed with the International Monetary Fund (IMF) in December. Egypt had been bringing fuel prices closer to international levels only for a series of currency devaluations to undermine the process over the past year. The Egyptian pound has fallen by nearly 50% against the dollar over the past 12 months.

The country's fuel pricing committee left the diesel price unchanged, the petroleum ministry said in a statement, but raised the price of 80-octane petrol by 0.75 Egyptian pounds, 92-octane petrol by 1 pound and 95-octane petrol by 0.75 pounds to 8.75 Egyptian pounds (USD0.29), 10.25 and 11.50 per litre, respectively. The diesel price was kept at 7.25 pounds per litre.

Diesel is now about 50% lower than international prices and 95-octane petrol about 40% lower, said Allen Sandeep of Naeem Brokerage. EFG Hermes economist Mohamed Abu Basha estimates that the increases could increase headline inflation by 0.2 to 0.3 percentage points. Inflation hit a five-year high of 25.8% in January.

"Gasoline prices were raised, but diesel unchanged. So it should not have a big impact on inflation," Abu Basha said. A rise in the prices of global commodities including wheat and oil after Russia's invasion of Ukraine last year added to financial pressures on Egypt, driving it to seek a rescue package from the IMF.

In July 2022 the government announced a rare increase to the price of diesel but said it was still subsidising the fuel at the rate of about 55 billion Egyptian pounds per year. Pricing of fuel has been set under quarterly reviews since 2019, taking account of global markets and the exchange rate, in line with previous commitments to the IMF.

We remind, BP has signed a memorandum of understanding with the Egyptian government with the aim of establishing a large-scale renewable hydrogen production facility in the North African country. BP is to evaluate the technical and commercial feasibility of developing an export hub in Egypt, exploring high-potential locations across the country for renewables.

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Dow and X-energy have signed a joint development agreement (JDA) to develop a nuclear small modular reactor (SMR) at one of Dow’s US Gulf Coast sites, said the companies.

Dow, the world’s leading materials science company, and X-Energy Reactor Company, LLC (“X-energy”), a leading developer of advanced nuclear reactors and fuel technology for clean energy generation, announced today their entry into a joint development agreement (“JDA”) to demonstrate the first grid-scale advanced nuclear reactor for an industrial site in North America.

As a subawardee under the U.S. Department of Energy’s (DOE) Advanced Reactor Demonstration Program (“ARDP”) Cooperative Agreement with X-energy, Dow intends to work with X-energy to install their Xe-100 high-temperature gas-cooled reactor (“HTGR”) plant at one of Dow’s U.S. Gulf Coast sites, providing the site with safe, reliable, low-carbon power and steam within this decade. The JDA includes up to USD50 million in engineering work, up to half of which is eligible to be funded through ARDP, and the other half by Dow. The JDA work scope also includes the preparation and submission of a Construction Permit application to the U.S. Nuclear Regulatory Commission (NRC).

Nuclear SMRs could play an important part in decarbonising the chemical and other industries, and may eventually power electric cracking.

X-energy, based in Rockville, Maryland, is a developer of advanced small modular nuclear reactors and fuel technology for clean energy generation.

We remind, Dow intends to construct the sector's first net-zero carbon emissions ethylene and derivatives complex with respect to scope 1 and 2 carbon dioxide (CO2) emissions, at its Fort Saskatchewan (Alberta, Canada) site. The project involves a new 'net-zero carbon emissions' ethylene cracker at the site, set for launching by 2027. It would expand Dow's ethylene and polyethylene capacity by over 200% from its Fort Saskatchewan site, while retrofitting the site's existing assets to net-zero carbon emissions.

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