US draw on Latin oil may shape Brazil refineries – analysts

27 January 2010 19:15  [Source: ICIS news]

HOUSTON (ICIS news)--The US draw on Brazilian crude oil to make up for declining Mexican supply could influence how much refining capacity Brazil decides to build, analysts said on Wednesday.

Those decisions, which may in turn affect planned petrochemical developments in Brazil, could be influenced by fiscal pressures and access to credit, with elections in 2012 a further complicating factor, said Roger Tissot of consultancy Gas Energy Latin America.

“Refining and petrochemicals are the pillars of any industrialisation effort,” Tissot told a Houston conference organised by Argus Media.

But while Brazil is living its “China moment” as the leader of a rebound in Latin American economies, “resource nationalism will be confronted with economic realities”, Tissot said.

Brazil’s offshore oil discoveries are very large, but will be difficult and costly to develop, pushing the resources of state-controlled oil company Petrobras to the limit, he said.

Jaime Brito, a director at Washington-based consultancy PFC Energy, said that instead of building up its own refining capacity, Petrobras might decide to buy refinery assets in the US as it exports its growing crude oil production.

“In the next couple of years, Brazil will be more important for the US than Mexico” as a crude oil supplier, Brito said.

That may encourage Petrobras to enter into long-term supply contracts with US refiners, many of which already have made expensive investments in the deep conversion capacity needed to extract the most value out of the heavy crude grades that come from Latin America, he said.

Brazil has already commenced construction of a $20bn (€14bn) refinery in the northeastern state of Maranhao.

The refinery would have a capacity of 300,000 bbl/day capacity upon start-up in 2013, but will be expanded to 600,000 bbl/day by 2015.

Aside from the cost of the new refinery projects, the investment decisions are being taken against a backdrop of increasing reliance in Brazil on sugar-based ethanol as a transport fuel.

Another factor in the equation is the consolidation of Brazil’s chemical producers under the control of Petrobras.

($1 = €0.71)

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By: Stephen Burns
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