Brazil Seeks Chinese Help Building Oil Refineries

by: energytribune Posted date: February 28, 2013 In: Global News, South America

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By Leonardo Goy

BRASILIA, Feb 28 (Reuters) – Brazil’s government said Thursday it is seeking Chinese help to finish work on two oil refineries, a sign of strengthening ties between the emerging powers as well as financial troubles at state-run oil giant Petrobras.

Petrobras’ CEO Maria das Gracas Foster was in China negotiating a partnership with China Petroleum & Chemical Corp (Sinopec) that would allow the company to finish diesel refineries in two northeastern states by 2018.

Petrobras is under pressure to build refineries and boost its fuel output as Brazil’s economy has boomed over the past decade. But the company’s cash flow is also under strain as the government has forced it to sell gasoline at a loss in recent years.

“Petrobras is facing a certain financial difficulty,” Energy Minister Edison Lobão told reporters in Brasilia. “I recommended that its president go to China to negotiate with a large state-run Chinese firm.”

He did not specify what shape the partnership might take, what the financial details would be, or what Sinopec would gain. This would not be Petrobras’ first deal with China, which recently became Brazil’s largest trading partner. In 2009, China Development Bank signed a $10 billion, 10-year loan deal with Petrobras, under which the state-run oil company would supply Sinopec with 200,000 barrels a day through 2019.

Lobao said Foster would seek additional international partnerships on other projects, including production and exploration, in other countries.

Soaring costs and stagnant production led Petrobras to seek a partnership with Venezuela’s PDVSA to help build another refinery in Pernambuco state seven years ago, but PDVSA has not yet paid for its stake in the Abreu e Lima refinery that is supposed to begin operations this year.

In September, Petrobras said it would seek help from South Korean-American refiner GS Caltex to build Premium II, which will likely cost $11 billion according to a report from the Ceara state government’s development agency. Petrobras is trying to reduce its dependence on imported fuels by building more domestic refineries. The Premium 1 and 2 refineries will produce diesel fuel.