Overruns, recklessness riddle Petrobras Comperj project – audit

HOUSTON (ICIS)–Petrobras’s Comperj project is riddled with delays, cost overruns and reckless management, a state audit found, as it listed numerous modifications that raised the cost of the project from $6.1bn to nearly $50bn.

Petrobras said on Monday that it was not commenting on the audit since it was still awaiting final analysis by the Brazilian Federal Accounting Court (TCU), the entity that conducted the review.

In the audit, the TCU did not mention corruption, embezzlement or theft.

However, it did find excessive risk-taking and a disregard of standard operating procedures, causing significant effects on the timing and the cost of the project. Contracts worth reais (R) 7.6bn ($3.1bn) were given without bidding.

The audit warned that the project is threatening Petrobras with heavy losses.

In addition, the audit found a lack of clarity in disclosing the costs of the project.

The Complexo Petroquimico do Rio de Janeiro (Comperj) was originally conceived in 2004 at a cost of $6.1bn, the audit said. It would be completed in 2011, the audit said.

Back then, it would have a 150,000 bbl/day refinery and downstream petrochemical units, which would receive much of the refining output.

By 2006, the cost rose to $8.4bn, and the start-up date was moved to 2012.

In 2010, Petrobras undertook a massive revision of the project, the audit said. A second refinery train was added, increasing Comperj’s capacity to 330,000 bbl/day.

Moreover, the refineries would be optimised for fuel production, the audit said. The petrochemical plants would use naphtha produced from the refinery units.

Under the new plans, Petrobras would have a 100% stake in the refineries and a 40% stake in the petrochemical portion. At this point, Braskem would be involved in the petrochemical units.

The first refinery train would start-up in 2013, while all of Comperj would start in 2017, the audit said.

The revisions raised Comperj’s price substantially. The first refinery train would cost $7.79bn, while all of Comperj would cost $26.87bn.

Yet, Petrobras was not done changing its plans for Comperj.

In 2012, the company decided to change the feedstock of the petrochemical units to natural gas liquids (NGLs), a response to the shale-gas boom in the US.

Since Comperj would now use NGLs, it would need a natural-gas processing unit.

Moreover, Comperj needed to do something with all of its naphtha, since it would no longer be consumed by the petrochemical units.

Petrobras now added more refining units to handle the naphtha, such as a naphtha hydrotreater and a fluid catalytic cracker (FCC).

Meanwhile, Petrobras expanded the capacity of the second refinery train, bringing Comperj’s total refining capacity to 465,000 bbl/day.

The first train alone would cost $13.5bn, and it would not start up until November 2016, the audit said. All of Comperj would cost $30.5bn. By 2012, another estimate put the value of Comperj at $47.7bn.

The audit did provide some details regarding the petrochemical units that were considered for Comperj at various stages of its conception.

The audit mentioned some projects, such as polycarbonate (PC) and methyl di-p-phenylene isocyanate (MDI). Another section mentioned an elastomers plant valued at $519m.

Other units mentioned included the following:

A 14m cubic metre/day natural gas processing unit at $1.602bn.

A 7m cubic metre/day natural gas processing unit at $588m.

An ethane separator at $360m.

Currently, progress for the petrochemical portion of Comperj is stuck as Petrobras and Braskem continue to negotiate NGL supplies for the units.

The audit mentioned Braskem only as a participant in Comperj, and it was not reviewed by the TCU.

For Petrobras, the audit is among a series of mishaps.

Paulo Roberto Costa, the company’s former director of downstream operations from 2004 to 2012, is facing charges of laundering public funds in relation to the construction of the Abreu e Lima refinery in northeast Brazil, and obstructing police investigations.

Meanwhile, the cost of the Abreu e Lima refinery rose from $4bn to about $20bn.

The 230,000 bbl/day refinery project, also known as the Refinaria do Nordeste (RNEST), was initially supposed to start up in 2010. The date has since been moved to November.

Earlier this year, senators questioned the company’s decision to acquire a refinery in Pasadena, Texas, in a deal that ended up costing Petrobras $1.25bn. The previous owner had acquired the refinery for $42.5m in 2005.

Additional reporting by Simon West

($1 = R2.46)