Brazil Ultrapar ends talks to buy Petrobras refinery

HOUSTON (ICIS)–Ultrapar has ended negotiations to acquire a refinery from state-controlled Petrobras, the Brazilian conglomerate said on Friday.

The Alberto Pasqualini Refinery, known as REFAP, is in Canoas, Rio Grande do Sul state and has a capacity of 201,000 bbl/day.

“Despite the effort deployed by both parties during this process, certain critical conditions defined in the company’s binding proposal were not confirmed throughout the negotiations, unbalancing the expected risk and return equation,” Ultrapar said in a statement. It did not identify those  critical conditions.

Ultrapar began talks to acquire REFAP after negotiations ended for another Petrobras refinery, the Presidente Getulio Vargas Refinery (REPAR) in Araucaria, Parana state. That refinery has a capacity of 208,000 bbl/day.

The acquisition of the refinery was part of a Ultrapar’s plan to become more focused and integrated in the fuel market.

The company owns the fuel retailer and distributor Ipiranga, liquid bulk storage firm Ultracargo and Ultragaz, a distributor of liquefied petroleum gas (LPG).

The refinery acquisition would have been the next step in the revamp of Ultrapar’s portfolio of businesses.

The company is in the process of selling its surfactants business, Oxiteno, to Thailand-based Indorama Ventures for $1.3bn.

Earlier this year, it agreed to sell its pharmaceutical chain, Extrafarma, to Pague Menos for reais (R) 700m ($130m). Ultrapar also signed an agreement to sell its 50% stake in ConectCar for R165m.

In its statement about the failed refinery talks, Ultrapar said the sales will significantly reduce its financial leverage and increase its ability to make more investments.

“Ultrapar will continue to invest in the growth of the existing platform in the energy and infrastructure sectors through Ipiranga, Ultragaz and Ultracargo, as well as in new business opportunities leveraged in the Brazilian energy matrix transition,” the company said.

Ultrapar did not rule out acquiring one of the refineries that Petrobras is trying to sell. “The company will also continue to monitor the developments of Petrobras’s assets sale programme.”

Ultrapar’s US-listed shares were up by more than 3% in late-morning trading.

MORE PETROBRAS TALKS FALL THROUGH
The end of talks with Ultrapar marks the third time that Petrobras has ended negotiations to sell one of its refineries.

In addition to REFAP and REPAR, talks fell through to sell the Abreu e Lima refinery in Pernambuco. That refinery, known has RNEST, has a capacity of 88,000 bbl/day.

Petrobras has yet to set a new closing deadline for RNEST or for REFAP.

The following table shows the refineries that Petrobras is trying to sell and the deadlines for when it could reach an agreement.

Refinery	Deadline	Location	Capacity (bbl/day)
LUBNOR	30/10/2021	Fortaleza, Ceara	8000
REGAP (Gabriel Passos)	30/10/2021	Betim, Minas Gerais	157000
SIX (Unidade de Industrializacao do Xisto)	30/10/2021	Sao Mateus do Sul, Parana	–
REPAR (Presidente Getulio Vargas)	31/12/2021	Araucaria, Parana	208000
RNEST (Abreu e Lima)	–	Ipojuca, Pernambuco	88000
REFAP (Alberto Pasqualini)	–	Canoas, Rio Grande do Sul	201000

Source: Petrobras

LUBNOR’s capacity includes 2,000 bbl/day of naphthenic base oils.

SIX converts the kerogen found in shale into oil through pyrolysis.

In a statement, Petrobras said that competitive processes are still underway to sell REGAP, LUBNOR and SIX. It made no comments about REPAR.

So far, Petrobras has reached deals to sell two other refineries. Recently, it signed a contract to sell for $189.5m. the Isaac Sabba refinery (REMAN) in Amazonas state to Ream Participacoes, a regional fuel distributor owned by Grupo Atem.

The refinery has a capacity of 46,000 bbl/day.

Petrobras has already approved the $1.65bn sale of its refinery in Bahia state to Mubadala Capital. The complex is known as the Landulpho Alves Refinery (RLAM), and it has a processing capacity of 333,000 bbl/day.

Petrobras will keep the following refineries.

Refinery	Location	Capacity (bbl/day)
RECAP (Capuava)	Capuava, Sao Paulo	57,000
REDUC (Duque de Caxias)	Duque de Caxia, Rio de Janeiro	239,000
REPLAN (Paulinia)	Paulinia, Sao Paulo	434,000
REVAP (Henrique Lage)	Sao Jose dos Campos, Sao Paulo	252,000
RPBC (Presidente Bernardes)	Cubatao, Sao Paulo	170,000

Source: Petrobras

RISING FUEL PRICES
Petrobras is trying to sell its refineries at a time when fuel prices in the country are rising rapidly.

In the past, the Brazilian government has intervened in the country’s fuel markets, limiting ability of refineries to recover their costs to make and import fuel.

Earlier this year, President Jair Bolsonaro complained about the rise in gasoline and diesel prices in Brazil. After those comments, the government requested that former CEO Roberto Castello Branco be replaced by Joaquim Silva e Luna, a reserve Army General who had served in the Ministry of Defence in 2014-2019.

Refineries produce naphtha, which many of Brazil’s crackers use to make ethylene. Refineries also produce aromatics and propylene.

Thumbnail image shows a gasoline nozzle. Source: Shutterstock

($1 = R5.38)

(Recast last table to exclude RPCC (Potiguar Clara Camarao) from the refineries that Petrobras plans to keep)