Major disagreements preventing joint projects by Brazil’s state-owned Petroleo Brazileiro SA (Petrobras) and Venezeula’s Petroleos de Venezuela SA (PDVSA) will be cleared up in 3 months, according to the presidents of the two countries.
“I am optimistic we can deliver good news in 90 days,” said Brazil President Luiz Inacio Lula da Silva following his meeting with Venezuela President Hugo Chavez. “In that period we will be able to define all the details, not only of the [Abreu e Lima] refinery, but also of Petrobras’s participation in the Orinoco belt,” Lula said.
Earlier in a private session accidentally broadcast to reporters, the two presidents expressed their irritation with the continued breakdown of negotiations between Petrobras and PDVSA.
“I confess my frustration, but it’s the fault of both countries that we haven’t been capable of reaching an accord,” Chavez said, referring to talks between the two oil companies that began in 2005. The Venezuelan president also expressed regret that Petrobras is one of the few important international oil companies without any operations in the Orinoco belt. Referring to the Abreu e Lima refinery project, Lula joked, “The accord was not possible because Petrobras and PDVSA are two very pretty and vigorous young ladies who fight over any problem.”
Extended agreement
In the absence of a new agreement, Petrobras and PDVSA executives decided on a 90-day extension of the agreement they signed last year, which calls for joint participation in the refinery now under construction by Petrobras.
When built, Abreu e Lima will be capable of processing 200,000 b/d of oil, with Petrobras and PDVSA each supplying half of the required crude.
But the project has been delayed by a dispute over how much the joint venture will pay for the crude from Venezuela, according to Petrobras Chief Executive Jose Sergio Gabrielli. He said he also objects to PDVSA’s bid for Brazilian distribution rights to the fuel produced by the refinery.
Gabrielli’s remarks echoed earlier statements by Petrobras supply and refining director Paulo Roberto Costa. In February, Costa said PDVSA needed to change its position on the price of crude to be imported from Venezuela and drop its demand that its 40% of the oil refined at the site be put into the consumer market of northeastern Brazil (OGJ Online, Feb. 13, 2009).
The role of the Petrobras executive in the disagreement with PDVSA was highlighted by Lula who said, “Chavez is even ready to invite Gabrielli to a meeting to see why he has such a hard heart.” The Brazilian president went on to say: “One of the two (Gabrielli or his PDVSA counterpart) has one [hard heart], because the negotiation is proceeding by millimeters.”
Earlier in May, Petrobras said it would restart the tender process for the Abreu e Lima refinery, seeking lower bids on work to be done at the facility in order to cut costs. Original bids for the refinery came in at 23 billion Brazilian reals ($10.9 billion), more than double the BRL9 billion budget. Under the preliminary shareholders’ contract, Petrobras owns 60% of Abreu e Lima while PDVSA holds the remaining 40%.
