Petrobras refinery sales open feedstock options

Brazilian state-controlled Petrobras' plan to sell half of its 2.2mn b/d of domestic refining capacity will eventually open up new opportunities for domestic and foreign oil suppliers.

Future refinery buyers — the first of which could be Abu Dhabi's state-owned investment fund Mubadala next month — are likely to negotiate crude supply agreements with Petrobras to cover short-term needs. But they will not be required to use the company's crude, a senior Petrobras executive tells Argus. The buyers will have more feedstock sourcing options from dozens of domestic producers ranging from small independents to foreign giants such as Shell. But the new refiners could also source supply outside Brazil.

Petrobras is currently in the process of selling eight refineries with around 1.15mn b/d of installed capacity. Downstream director Anelise Lara said yesterday that all sales would likely be finalized in first quarter 2022, implying the extension of a 2021 deadline agreed with anti-trust watchdog Cade.

Petrobras has already received binding offers for four of the eight refineries. Two others—208,000 b/d Alberto Pasqualini (Refap) and 208,000 b/d Presidente Getulio Vargas (Repar)—will receive binding bids on 10 December. The 130,000 b/d Abreu e Lima refinery (Rnest) and 166,000 b/d Gabriel Passos (Regap) are scheduled to receive binding bids in first quarter 2021.

A sales agreement for the 333,000 b/d Landulpho Alves refinery (Rlam) in Mataripe will likely be signed in January, Lara said. Petrobras has been in exclusive talks with Mubadala for the refinery since July, and had initially planned to approve a deal by year-end.

Petrobras said this week that lower domestic crude sales, resulting from increased competition with alternative suppliers, would open more space for exports in the 2021-25 period. The company estimates 891,000 b/d of exports in the five-year period, up from around 445,000 b/d in 2015-19.

China will remain the main destination for exports, but the company is also planning to dispatch more crude to Europe, the US and India, where low-sulfur Buzios grade has gained favor.

At the virtual Rio Oil and Gas conference this week, some market participants warned that crude importers could face bottlenecks with existing logistics infrastructure, a concern Petrobras executives dismissed.

In addition to fuel, Brazil has long imported crude mainly for blending at Petrobras refineries. Imports have steadily declined in response to increasing domestic production of lighter grades, mainly from large pre-salt deposits offshore.

Crude imports hovered around 175,000 b/d over the past five years after peaking at 463,000 b/d in 2004, according to data from oil regulator ANP. As pre-salt output has climbed in recent years, the share of imported crude in the domestic refining system has dropped to below 10pc from around 22pc in 2000-10.

By Nathan Walters