Brazil’s Petrobras to expand refinery divestment program under new model

Brazilian state oil company Petrobras said here Thursday it plans to expand and accelerate a refinery divestment program aimed at shoring up its balance sheet.

It said, however, that it will change that program’s model to avoid creating regional monopolies and guarantee competitiveness in the sector.

“The refinery sale process is not suspended. We’re just stating that the model that was initially announced is not competitive and that we’ll be announcing a new model,” Petrobras CEO Roberto Castello Branco said at a press conference.

The chief executive officer said the oil giant’s previous divestment plan, whose goal for 2017-2018 was to raise $21 billion through sales of non-core assets, will be expanded and accelerated.

“We’ll be more aggressive, and that means not only being faster with the sales but also including new assets. For now, we can’t give a figure for our divestment target since it will be the market that determines the value of the assets,” Castello Branco said.

“We want to include new assets in the divestment process, such as ... oil production blocks in shallow water, onshore fields and mature fields. We’ll also include some of the thermoelectric plants, but we’ll analyze them beforehand asset by asset,” the CEO said.

Petrobras, which currently has a monopoly on oil refining in Brazil, is looking to sell some refineries in a bid to boost competitiveness in that sector.

Last year, the company’s management announced a plan to sell up to 25 percent of its refinery assets in two different areas of the country.

Initially, the process was to involve creating two new subsidiaries to hold refinery, pipeline and storage terminal assets in Brazil’s northeastern region and the country’s south and selling stakes in those units to other companies.

Under the plan, Petrobras was to keep full ownership of refineries in the country’s southeast that are the biggest and most productive.

“We’re looking at a new model that addresses our interests, which are to raise money to pare debt and finance production without giving rise to regional monopolies controlled by partner companies. We want a competitive market and when we’ve defined that model we’ll announce it,” Castello Branco said at the press conference, estimating that that process could take around three months.

The CEO also hailed Petrobras’ strong results in 2018, when the Rio de Janeiro-based company posted a profit for the first time in five years.

On Wednesday, Petrobras reported net income of 25.8 billion reais (around $6.9 billion) and record adjusted earnings before income, taxes, depreciation and amortization (Adjusted EBITDA) of 114.9 billion reais in 2018.

Castello Branco also touted Petrobras’ success in reducing its gross debt in recent years, saying it had fallen from $126.2 billion in 2016 to $84.4 billion last year.