How Brazil’s Petrobras plans to stay competitive amid refining, gas market openings

Bnamericas Published: Thursday, July 08, 2021
How Brazil’s Petrobras plans to stay competitive amid refining, gas market openings

Brazil’s Petrobras is selling eight refineries and exiting the local natural gas transportation and distribution segments. 

Despite the planned divestments, the state-owned firm will retain about 50% of market share in terms of refining, gas production and sales. 

To boost its competitiveness in an open market environment while preparing for the energy transition, Petrobras is planning large investments. 

Examples of such investments include the RefTOP program, involving US$300mn capex to increase the efficiency and operational performance of five plants, and a project for the reduction of CO2 emissions at one of its gas treatment units. 

BNamericas did an email interview with Petrobras’ refining director, Rodrigo Costa Lima e Silva, where he talks about these and other initiatives.

BNamericas: What are the main objectives and goals of RefTOP? 

Lima e Silva: The aim of RefTOP is to increase the competitiveness of Petrobras' refining park, focusing on energy efficiency and operational performance in preparation for an open market in the country, as foreseen in the company's 2021-25 strategic plan. The program's targets were defined based on international performance indicators, particularly the indicator of Solomon Associates, an international reference company in oil refining, which uses proprietary methodologies to measure refinery operating performance. With the analysis of these and other benchmarks it is possible to identify opportunities to improve efficiency in all areas of operation, seeking to position us among the best refiners in the world.

Editor’s note: RefTOP foresees investments in the RPBC, Reduc, Recap, Replan and Revap refineries. 

BNamericas: Why was the program launched at this time?

Lima e Silva: Petrobras has been working on the RefTOP program for some time for it to mature and, in May of this year, concluded the analysis of comparative data with external benchmarks as part of the strategy to position itself more competitively in the opening of the market, considering the transition to a low-carbon economy. RefTOP aggregates a series of initiatives that were being analyzed by the company and which will now be conducted jointly in order to deliver benefits that result from the synergy between them.

BNamericas: Does RefTOP have any relation to Petrobras’ Biorefining 2030 program? And what is the current situation of the latter program and the next steps for it?  

Lima e Silva: RefTOP is part of the front line of the refining and natural gas board (DRGN) of Petrobras, along with the Biorefining 2030 and Gas+ programs. RefTOP is more focused on efficiency, which invariably results in sustainability and serves as a contribution to the Biorefining 2030 program, whose scope is focused on the production of derivatives from renewable raw materials. These programs prepare our refining and natural gas activities for an open, competitive market in transition to a low-carbon economy

The Biorefining 2030 program aims to transform the refining park to maximize value by taking advantage of synergies and diversifying into lower-emission products in which we have a natural vocation and competitive advantage. The initiative foresees investments in projects for the production of a new generation of fuels, more modern and sustainable than the current ones.

BNamericas: Does Petrobras plan to launch a similar initiative in the natural gas area, for example, to revitalize its gas processing units and pipelines?

Lima e Silva: We are working on projects to modernize and increase the availability of existing assets, such as increasing the interval between maintenance campaigns for thermoelectric plants, efficient monetization of our own gas, reducing the intensity of carbon emissions – such as carbon emission reduction project Monteiro Lobato gas treatment plant (UTGCA) – and offering products with higher added value.

This year, we are carrying out the expansion of the Guanabara bay regasification terminal [in Rio de Janeiro], the predictive monitoring of large gas asset machines, the continuity of the construction of the Itaboraí gas processing asset [also in Rio de Janeiro], and other projects in early development stages that provide for future gas units. Petrobras is also analyzing a development plan for the Gaslub area, in Itaboraí, which includes a project of an integrated operation with the Reduc refinery for the production of lubricant base oil and high quality fuels, and the business opportunity of a thermoelectric plant. The studies are in the initial phase and, once the economic attractiveness of the business is confirmed, they may add value to Petrobras' fuel, lubricant and natural gas supply chain.

BNamericas: What is the Gas + program about, what is its current status, and what are the next steps? 

Lima e Silva: The Gas + program contemplates improvements in the processes to reduce or eliminate positioning/relationships gaps with the market, with the definition of complementary initiatives to eliminate or minimize these gaps, contributing to a high performance in a more competitive gas market. We have three working fronts that aim to capture commercial opportunities through new products, new forms of customer relationships, and the development of new business models of digital transformation with the use of digital tools – both to maximize the business result and to optimize the operation of assets – and the development of high-performance assets to implement projects related to improving reliability and efficiency.

As a result of this effort, we launched new commercial products in early May, which move in the direction of meeting market demands for greater product diversification, flexibility, and innovation, such as the introduction of a new gas-gas indexing, while maintaining the quality and reliability. Another result was the development and presentation to the market of a proposal for a network balancing product, foreseen in CNPE resolution 16/2019. This product, as proposed by Petrobras, consists of flexible natural gas purchases and sales contracts for the injection and withdrawal of gas from the network, which aim to absorb fluctuations in market supply and demand and ensure the reliability of the transportation service.

BNamericas: How can investments in refining and natural gas contribute to the energy transition process at Petrobras?

Lima e Silva: The most rational strategy and the one with the quickest economic and environmental return for the energy transition in the O&G industry is to improve the energy performance of assets. Along this line, the Petrobras investments in the country’s natural gas chain aim to increase gas availability for the market and energy demand growth, including the expansion and security of servicing the electricity sector through more efficient and lower-emission thermoelectric plants - outlining the energy transition path to less carbon intensive sources.

BNamericas: With what refining and natural gas market share targets is Petrobras working for the next few years in terms of the domestic market?

Lima e Silva: Petrobras made strategic choices in the refining and natural gas segments with the objective of ensuring the highest possible return on invested capital. There will be a reduction in the company's participation with the disinvestment in refining and in several segments of the natural gas chain, in line with the commitments made under the TCC [conduct cessation agreement] signed with [antitrust watchdog] Cade. In the refining segment, we will maintain more than 50% of the production capacity and will operate competitively in the face of robust demand. In the natural gas segment, even with the full exit from the distribution and transportation segments, Petrobras will continue to have a relevant participation in the production and sale of its own gas, with a market share above 50%.

BNamericas: Does the company plan to expand its exports of derivatives? And is it working to become more competitive abroad?

Lima e Silva: Petrobras has a global coverage in the sale of [crude] oil and oil products. Our offices abroad permanently monitor the best product and oil purchase/sale alternatives. The determination of the company's exportable surplus is a dynamic process that depends on the balance between supply and demand in the domestic market. In case of greater availability for export, the company is able to identify the most profitable destinations for these surpluses in the international market.

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