GS Caltex cancels Petrobras refinery deal

Monday, October 14, 2013

South Korea's GS Caltex has scrapped plans for a joint venture in Brazil's Premium II refinery project, casting fresh doubt over the ability of state-run oil firm Petrobras (NYSE: PBR) to meet its downstream goals.

GS Caltex chairman Hur Dong-Soo told media on Monday the decision reflected the company's focus on adding value from oil derivatives for its domestic market.

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"We decided not to go for the (Brazilian) project. We dropped it completely and so has GS Energy as we are not sure whether it is a profitable project," Hur was quoted telling media.

"It usually costs about US$900mn to build a 40,000b/d facility. If we want to do 150,000b/d, you can imagine how much it costs."

GS Caltex is jointly controlled by Chevron Corp (NYSE: CVX) and South Korea's GS Energy.

Petrobras was not immediately available for comment on Monday.

The decision comes less than a month after Venezuela's state oil company PDVSA reportedly abandoned its multibillion-dollar commitment to the Abreu e Lima oil refinery in Brazil's northeastern city of Recife.

In June Petrobras signed a letter of intent with GS Energy Corporation to invest in the US$5.5bn Premium II plant.

Located in the municipality of Caucaia, 50km from Fortaleza, Premium II will have a production capacity of 300,000b/d when finished in 2018.

Petrobras says four new refinery projects - which also include the Premium I and Comperj facilities, are vital to reducing Brazil's dependence on fuel imports and easing a widening trade deficit.