Petrobras: US refinery had been a “potentially good” deal up to 2008

Petrobras CEO Graça Foster said Thursday (Apr. 30) that the purchase of oil refinery Pasadena Refining System Inc., in Texas, had been a “potentially good” project up to 2008, bearing in mind the economic conditions at the time, with the consumption of oil by-products on the rise and high profit margins. She noted that the decrease in the refinery’s yields was only reported after 2008.

“Profit margins were reduced because the market was down, and because we didn’t carry out a revamp [i.e., make the investments necessary to raise the average refinement level from 30-60 thousand barrels to 100 thousand per day],” explained Foster, who had previously dubbed the purchase of the refinery “bad business” during a meeting with senators on April 15. She believes the deal was in line with the goals then set by the oil giant.

“In 1999, the orientation, confirmed in 2004, was that we had to expand our overseas refinement,” she said, also mentioning refineries purchased by the oil firm in Argentina and Bolivia during the period. Today, Petrobras owns three refineries abroad, including Pasadena, whose refinement levels combined amount to 230 thousand barrels per day. “The oil produced by Petrobras was mostly of a heavier sort, so that, in order to commercialize it, the company had to give refineries discounts. That’s why taking this oil for refinement overseas was an appropriate strategy,” she added.

In a public hearing held on Thursday (30), addressing at once two commissions from the Chamber of Deputies, Foster further declared that the state-run company paid $554 million for the refinery and subsequently $341 million for the section owned by the previous proprietor, Belgian Astra Oil, in addition to another $354 million spent on interest rates, loans and guarantees, legal expenses and the change in the deal with Astra.

She also explained that “For Pasadena, Astra paid [an amount] estimated at $360 million,” which, according to the CEO, includes the acquisition of Pasadena’s supplies which cost $104 million, apart from monthly payments for service and equipment contracts aimed at raising refinement capacity, which fluctuated from 30-60 thousand barrels per day to 100 thousand barrels. The collection of these figures, by an internal commission assembled by Petrobras, is expected to be concluded in the first weeks of May.

The executive officer reiterated that Petrobras has invested $685 million in Pasadena and that the operation resulted in low yields in 2008, 2009 and 2012 – totaling $530 million. “And this occurred only because we didn’t carry out the revamp and there was a drop in refinement and consumption levels.”

Foster said the losses incurred can be recouped, but this will depend on a market reaction, with a higher refinement rate and increased consumption of by-products. She declared that Petrobras keeps assessing the yields of both its overseas and domestic investments, so as to ascertain the most profitable action to be taken by the company.

Translated by Fabrício Ferreira