Brazil Senate to investigate cancelled refinery

Source: ICIS News

2015/09/15

MEDELLIN, Colombia (ICIS)--Brazil’s Senate said on Tuesday it would begin an investigation into state-controlled energy producer Petrobras’s termination of the Premium I refinery project in the northeastern state of Maranhao. 

The Senate’s environmental and consumer rights committee will ask Brazil’s federal accountability office to examine the legality of the suspension, the impact it had on state coffers and the measures Petrobras took to mitigate the effects of its decision, official news service Agencia Brasil reported. 

The construction of the 600,000 bbl/day Premium I refinery and the 300,000 bbl/day Premium II refinery in neighbouring Ceara state was halted at the beginning of this year due to poor economic performance and the lack of partners willing to invest, Petrobras said on 29 January.

Senator Roberto Rocha, who had requested the investigation, said the project had been included in Petrobras’s 2014-18 business plan, and that municipal and state authorities had invested money, donated land and granted tax incentives.

The senator said the probe should examine the fate of the large number of workers who had moved to the region in search of opportunities and how an estimated reais (R)2bn ($518m) had been invested in the project prior to its suspension.

Petrobras did not immediately respond to a request for comment.

The state oil company, currently mired in a massive corruption scandal, has been forced this year to cancel or postpone a number of key downstream projects.

Last month, the company said it had suspended construction of the 519,000 tonnes/year Nitrogen Fertilizer Unit 5 (UFN V) in central Minas Gerais state amid contractual disputes over feedstock supply and a decline in ammonia demand.

Petrobras has earlier announced the indefinite postponement of its 1.2m tonnes/year urea-producing Nitrogen Fertilizer Unit 3 (UFN III) in southern Mato Grosso do Sul state. The unit was 82% complete at the time of its annulment.

The company has also suspended for an “extended period of time” a second 215,000 bbl/day processing train at the Abreu e Lima refinery (RNEST) in northeast Pernambuco state and the Rio de Janeiro Petrochemical Complex (Comperj).

However, both projects have been included in Petrobras’s recently-released 2015-19 business plan, which saw spending in downstream and distribution operations slashed by 67% compared with the previous 2014-18 plan.

The company said in a statement on 28 August that its business plan includes investments in Comperj related to natural gas treatment and supply and equipment maintenance.

The plan also calls for business restructuring, including the “pursuit of partners for certain projects, including Comperj”.

The company was responding to a report in Reuters, which quoted a Petrobras executive as saying that an additional $4.3bn would be required to complete the first phase of the project, with $2.3bn of this total coming from partners.

The quoted official said the first phase of the project could begin operations in 2020.

($1 = R3.86)