The value of refineries being sold by Brazilian state-run oil company Petrobras might face additional pressure as the country’s oil regulator mulls banning the use of S500 diesel, sources familiar with the matter said.
Brazil is expected to replace S500 with low-sulfur S10 diesel in the coming years, requiring large investments in some refineries in order for them to produce the less polluting fuel.
Two of the refineries put up for sale by Petróleo Brasileiro SA, as the company is formally known, in particular face uncertainties – Refap and Repar, located in the Southern states of Rio Grande do Sul and Paraná respectively.
Both have the capacity to process more than 200,000 barrels of oil per day but are not focused on producing S10 diesel.
Petrobras had expected to sign confidentiality agreements with interested parties in August to sell the plants, but questions are now mounting – including political ones, as presidential front-runner Luiz Inácio Lula da Silva opposes selling refineries.
An executive in the sector said: “Refap, and probably other refineries, will face problems (to be sold).” They added that Refap did not have the required capacity to produce S10 diesel.
A second executive, who asked for anonymity to discuss the matter, said: “Repar already makes a small amount of S10, so whoever buys it would need to invest in an adaptation – not in a conversion, which would require a lot more money.”
The ban on the use of S500 diesel is expected to occur by 2025. Market participants told Reuters that oil regulator ANP is expected to present a detailed schedule on the move in the coming months.
Asked if the change would affect refinery divestments, both Petrobras and ANP did not immediately respond.
In a statement, Petrobras said that S10 already accounts for more than half of its total diesel sales.
For more information visit Petrobras.com.br
