Petrobras to Reconsider Priorities if Campos Plans Rejected

Brazil's federal energy company Petrobras would prioritize development of the Espirito Santo, Santos and Sergipe basins if Rio de Janeiro state government blocks the construction of a pipeline to take future oil production from the Campos basin to refineries in Sao Paulo, O Globo Online reported Petrobras president Jose Dutra as saying.

The company has until March 30 to decide how to proceed with the 4.65bn real (US$1.6bn) oil transport and processing master plan (PDET). The project entails 113km of underwater pipelines from five Campos basin platforms to onshore facilities and on through a new 610km pipeline to refineries in Sao Paulo and Minas Gerais.

Rio de Janeiro state government rejects Dutra's assertions that the PDET is not connected to the choice of where to locate the refinery and says that the pipeline plan would scotch Petrobras' plans to build a new refinery in the state.

Rio de Janeiro has passed bills that raise ICMS sales taxes and increase red tape on environmental licensing in its efforts to pressure Petrobras into selecting the state for the refinery. State governor Rosinha Garotinho and local politicians also argue that the state would lose taxes and jobs if the refinery is not built there.

A possible solution in the event that Petrobras does not locate its refinery in what is Brazil's largest oil producing state is to increase investment in social programs, road building and irrigation programs in Rio as a means of compensation. "I think both parties will come to a deal and one possible compensation would be for Petrobras to strengthen dockyards in the state," oil analyst at consulting firm Tendencias Consultoria, Fabiana Fantoni, told BNamericas.

Twelve states are competing to host the refinery, and although "it makes sense to invest in other regions, [it] doesn't solve the problem of what to do with the Campos basin oil," Fantoni said.

The Campos basin accounts for 80% of Brazil's oil production and Dutra maintains that without the PDET, the basin would lose competitiveness against other regions. Brazil would take another year to increase production to 1.7 million barrels a day (mb/d) from the current 1.5mb/d. As far as the refinery goes, Fantoni believes the company will take another two or three years to decide.

"Until Petrobras announces its multi-year strategic plan [scheduled for the end of the first quarter], everything will be up in the air. However, it makes more sense for Petrobras to locate a refinery in the northeastern region, where there is lack of energy and where the company is losing space in the fuel retail market," she said.

In the northeast, local press reported that Rio Grande do Norte state is preparing to receive officials from a United Arab Emirates-based investment fund to appraise the possibility of investing in the refinery there. In Pernambuco, local government officials are in contact with Venezuela's oil company PDVSA and neighboring Ceará wants to attract Saudi Arabia's Aramco, Diario do Pernambuco reported. In the southeast, apart from Rio de Janeiro's maneuvering, Espírito Santo state governor Paulo Hartung said there is an unnamed foreign company interested in investing US$2bn in a refinery. And Sao Paulo, Rio's arch enemy, has what a number of observers consider to be a better market for end product, as well as more possibilities than Rio for refinery capacity expansions.

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