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September 25, 2019

Volume 3 Issue 4

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Brazil's Refinery Sell-off Plan Hits Phase Two

Brazil’s state-run oil company Petrobras has started the second phase of a plan to sell controlling stakes in eight oil refineries, inviting expressions of interest for four facilities, including one that houses a naphthenic base oil plant.

The second phase, kicked off Sept. 13, includes Lubrificantes e Derivados do Nordeste, which is located in Forteleza and produces asphalt and base oils. Lubnor’s base oil plant has capacity to make 1,290 barrels per day of pale oils.

The Lubnor plant is one of three base oil plants in Brazil and the country’s only source of naphthenic base stocks.

The first phase of the divestment was announced June 28 and included four other facilities, including the Landulpho Alves refinery in Mataripe, in the northeastern state of Bahia, which houses a 1,750 b/d API Group I base oil plant.

According to Petrobras president Roberto Castello Branco, all eight are expected to be sold by July 2021.

The administration of Brazilian President Jair Bolsonaro says it aims to sell 60 percent of its stakes in the refineries to raise funds that can be used to draw down the national debt. Officials say the sell-off will also benefit consumers and businesses by promoting competition in the fuels market, but some analysts are skeptical.

“While the government defends that the sale would increase competition in the fuels market, the various locations of the refineries along with Brazil’s large territory could result in regional fuel market monopolies after the sale, something that would not increase competition and, in turn, be less favorable to customers,” Claudio Silva, executive director for Brazil-based lubricant consultancy firm LubeKem, told Lube Report at the time of the phase one launch.

With combined nameplate capacity of more than 1.13 million b/d, the eight refineries represent 50 percent of Brazil’s national refinery footprint. The government hopes to raise $20 billion through the divestment.

The government released a teaser of the bidding documents, disclosing fundamental information about the assets and the eligibility criteria to be included in the selection of potential participants. Once expressions of interest are submitted, the signing of confidentiality agreements will follow and then the process to actually hand in offers.

In late August, approximately 20 entities – oil companies, investment funds and trading companies – submitted expressions of interest in refineries included in the first phase, local paper O Globo reported.

Petrobras intends to begin accepting proposals for the phase one refineries in October, and the corresponding process for phase two facilities will follow shortly thereafter.

Petrobras' Lubnor refinery

Photo courtesy of Petrobras

Brazil’s state-run oil company Petrobras started the second phase of a plan to sell controlling stakes in eight oil refineries. That includes includes Lubrificantes e Derivados do Nordeste, known as Lubnor, which is located in Forteleza. Lubnor’s naphthenic base oil plant has capacity to make 1,290 barrels per day of pale oils.