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December 11, 2019

Volume 3 Issue 5

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Petrobras to Sell Uruguay Business

Brazil’s Petrobras started the process to sell its distribution company in Uruguay so that it can exit the South American country’s lubricants, fuels and liquid fertilizers market.

Petrobras Uruguay Distribucion is based in the capital of Montevideo, operates a wholly owned lubricant terminal in that metropolitan area and is the country’s second-largest lube supplier. Uruguay is a small market with annual finished lube demand of approximately 13,000 metric tons, according to Brazilian consulting firm Lubekem.

The sale is being handled by Brazil’s Banco Itau. Those bidding on the business can request a confidentiality agreement and compliance certificate during the non-binding phase, which will last until Dec. 20. Bidders must have experience in fuel distribution operations with at least 15 service stations, have reported net revenue of $50 million or more, and at least $100 million in assets under management.

Lubekem Executive Director Claudio Silva said the Uruguayan market is probably too small to draw interest of big international players.

“I don’t think these assets will attract a lot of interest from big oil majors, investment funds or institutional investors, but it depends on the negotiation, strategy and their final price,” Silva told Lube Report. “However, it could make sense for local or regional independent players.”

Petrobras Uruguay Distribucion is owned by Petrobras’ subsidiary in Uruguay. The company claims to have a 27 percent share of the country’s lubricant market, trailing only Uruguay’s state-owned oil company Ancap and its wholly owned subsidiary Distribuidora Uruguaya de Combustibles S.A., which has a 37 percent share. Texaco and Axion supply 21 and 9 percent of lube demand, respectively.

In addition to the distribution hub, the sale includes several delivery points for marine fuels and lubricants at the country’s main public ports, as well as 90 fuel service stations and 16 convenience stores.

According to a Petrobras teaser on the matter, the business sold 497,000 tons of fuels and lubricants in 2018 and is expected to have U.S. $714 million in revenue and U.S. $11 million in earnings before interest, tax, depreciation and amortization in 2019.

The decision to sell the Uruguay business is part of a broader Petrobras strategy to divest downstream operations and to focus on upstream operations. Petrobras’ 2020-2024 Business Management Plan calls for selling the company’s 71 percent share in Petrobras Distribuidora as well as eight refineries.

The company aims for total asset sales to raise between 77 billion Brazilian reais (U.S. $18.6 billion) and 91 billion reais.

Petrobras originally acquired the distribution company in Uruguay from Shell in 2006. The company is the second largest fuels distributor in the country, with a 24.1 percent share, behind only Ancap, which has a 54.6 percent share.

Silva said that the Brazil-based lubricant consultancy firm “estimated a total demand in Uruguay of 55,000 barrels per day for liquid fuels and 250 barrels per day for finished lubricants last year,” confirming that Petrobras has a market share of around 25 percent in each category.