Petrobras looks to China for refinery solution

Thursday, February 28, 2013

Brazil's Petrobras (NYSE: PBR) is seeking a deal with China's Sinopec for the construction of its Premium I oil refinery in the northeastern state of Maranhão.

Federal energy minister Edison Lobão said during a television interview on Thursday the state-run company could not alone bear the cost of its US$24.9bn five-year refinery budget.

"Petrobras is having certain financial difficulties. I recommended to the [Petrobras] president, [Maria das Graças Foster] that she should go to China to close a deal with a big state-run company so that it becomes involved with the refinery in Maranhão," Lobão said.

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Premium I is one of four Petrobras refineries under construction and is seen by analysts as vital to reducing the company's rising oil import bill.

The Rio de Janeiro-based firm is expected to this year import 110,000b/d of gasoline and 190,000b/d of diesel to meet domestic demand. The company says it imported an average of 90,000b/d of gasoline in 2012.

Originally earmarked for a 2016 startup, Premium I is not expected to begin operating until 2018.

The refinery will comprise two production units capable of processing 600,000b/d destined to the premium fuels market. Its principal product will by diesel oil 10ppm, expected to make up 55.8% of total output.