OTC: Petrobras, Bolivia continue refinery sale talks

Petroleo Brasileiro SA (Petrobras) has not yet reached an agreement with Bolivian authorities on the price for its two refineries in Bolivia, the company's Chief Executive Jose Sergio Gabrielli said at the Offshore Technology Conference in Houston.

Uchenna Izundu
International Editor

HOUSTON, May 2 -- Petroleo Brasileiro SA (Petrobras) has not yet reached an agreement with Bolivian authorities on the price for its two refineries in Bolivia, the company's Chief Executive Jose Sergio Gabrielli said at the Offshore Technology Conference in Houston.

Gabrielli declined to give an indication of price for the refineries, stressing that negotiations are still underway. But he said Petrobras wants a fair price for the refineries it owns and operates, the Guillermo Elder Bell in Santos Cruz and the Gualberto Villarroel in Cochabamba. The two refineries together process 40,000 b/d of oil.

The Bolivian government is threatening to seize the refineries as part of its campaign to exert greater control of its energy resources. That strategy began a year ago with a surprise move to nationalize foreign investments in oil and gas assets in Bolivia. The Bolivian government and foreign energy companies have just concluded new contracts that hands the state control of their operations and a bigger share of their revenues.

Gabrielli said Petrobras signed a new contract with Bolivia last year, which then went to the Bolivian Congress for approval. "At the final stage of authorization they discovered they have some minor formal problems.... Today we have reached a final conclusion on the legal enforcement of the contract," he said. He added that the company last August left commercialization of liquids for Bolivian oil products.

He said that the company would not invest again in Bolivia until conditions in that country had stabilized.

Pasadena refinery
The company is also in discussions with its partner Astra Oil NV about upgrading and doubling the capacity of its 100,000 b/d Pasadena refinery in Texas with the hope that it will be able to process heavy crude oil, said Alberto Guimarães, general manager of Petrobras America.

Under a $4.5 billion investment program spanning 2007-13, the American subsidiary plans to produce 130,000 boe/d in 2013, which would represent Petrobras's biggest production abroad. It will focus on four major Gulf of Mexico regions: deep shelf, deep waters, Western Gulf, and ultradeep waters.

Gabrielli said Petrobras is evaluating a number of refinery acquisitions around the world, but declined to give details. Petrobras has 1.9 million b/d of refining capacity, which matches its worldwide crude production. However, the company has plans to increase its production 2.3 million b/d to 3.5 million b/d by 2010 and 4.5 million boe/d by 2015. "We need to have greater refining capacity," he added. Nigeria and the US are major areas for the company's growth.

LNG supplies
Petrobras has signed a spot cargo agreement with Nigeria for LNG deliveries for its planned floating storage and regasification units (FSRUs) ordered from Golar LNG Ltd. (OGJ Online, Apr. 25, 2007). Gabrielli said one ship is scheduled for delivery May 2008 and the other for January/February 2009. "The agreement says that when we need LNG and if Nigeria has it, we can get LNG, and we will pay the market price at the time," he revealed.

The FSRUs will be used at LNG receiving terminals at Guanabara Bay in Rio de Janeiro state, and Pecem in Ceara, with a combined regasification capacity of 20 million cu m/day. Petrobras also is assessing the construction of a third plant in Brazil, with a regasification capacity of 14 million cu m/day.

Petrobras will meet with officials from Qatar, Algeria, and Trinidad and Tobago to discuss LNG supplies as part of its effort to find diverse sources. Gabrielli said the company has signed a memorandum of understanding with Oman regarding deliveries. LNG is an important element of Brazil's strategy to reduce reliance on Bolivia and find flexible sources to meet natural gas demand in Brazil.

Espirito Santo Basin production
Petrobras plans to increase gas production from the Espirito Santo Basin in southeastern Brazil from 27.5 million cu m/day to 70 million cu m/day by 2011, the company revealed at the OTC. The basin holds over 1.5 billion boe, which represents 11.5% of Brazil's total reserves.

Increasing domestic gas production is a major priority for Brazil to help reduce its reliance on imports, particularly as its relations with Bolivia—a major exporter—are strained as Bolivia exerts state control over its resources and changes the terms of its agreements.

In 2010, local production may reach upwards of 20 million cu m/day, or 40% of the Brazilian gas offered in southeastern and southern Brazil, Petrobras said.

The producing fields in Espirito Santo Basin are Golfinho (light oil), Peroá Canapu and Camarupim, both of which are gas. Golfino started production last May using the Capixaba floating production, storage, and offloading system. "The Cidade de Vitória FPSO will go into operation in the same field in the second half of 2007. Each of these units is capable of producing 100,000 b/d," Petrobras said.

Drilling plans, license round
Petrobras will drill its first well in Libya next year on Block 18, the company said. It is talking to the Libyan government about other opportunities both onshore and offshore and plans to participate in the next bidding round.

Separately, Brazil plans to launch its ninth bidding round in September or October, Brazil's Energy Minister Silas Rondeau said. He explained that the bidding round has been delayed because of difficulties in allocating blocks but did not give details on how many would be offered or their locations. Oil industry executives have worried about the delay of the round because they find it difficult to plan their investment forecasts and to prepare joint bidding agreements.

Brazil's President Luiz Inacio Lula da Silva is expected to announce next week a number of business initiatives to help develop the country's oil and gas industry, Rondeau added.

Contact Uchenna Izundu at uchennai@pennwell.com.

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