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Petrobras to sell Pasadena Refining System in Texas to Chevron



By Jeff Fick / Platts


Petroleumworld 01 31 2019

Chevron has agreed to buy the Pasadena Refinery, near Houston, from Brazil's Petrobras for $350 million, Chevron said Wednesday.

"This expansion of our Gulf Coast refining system enables Chevron to process more domestic light crude, supply a portion of our retail market in Texas and Louisiana with Chevron-produced products, and realize synergies through coordination with our refinery in Pascagoula," said Pierre Breber, Chevron Downstream & Chemicals executive vice president in a press release.

The refinery runs light sweet crude only because its coker caught fire in 2011 and has not been repaired. A source familiar with the deal said it is likely that Chevron would rebuild the coker.

The assets include the refinery, pipelines connecting the refinery to crude production and major refined products pipelines, and "waterborne access to receive and ship crude oil and refined products," the release said.

The complex also includes a tank farm with 5.1 million barrels of crude and refined products storage capacity.

The sale ends Petrobras' controversial foray into the US refining sector. An ongoing corruption investigation discovered bribes, kickbacks and other malfeasance involved in the refinery's purchase that eventually led to the arrest and incarceration of Nestor Cervero, Petrobras' international director at the time of the deal.

Petrobras bought a 50% stake in the Pasadena refinery for about $350 million from Astra Oil in 2006, a massive overpay considering that Astra had paid just $42.5 million for 100% of the nearly century old plant the previous year. The deal also included a clause that granted Astra a put option to force Petrobras to buy the remaining 50% of the refinery.

Petrobras wanted to use the refinery as an entry point into the US fuels market and as a way to reduce the cost of Brazil's diesel and gasoline imports by purchasing and processing cheap landlocked US oil and shipping the refined products to Brazil. Petrobras quickly soured on the deal after the discovery of several multibillion-barrel oil discoveries in the country's subsalt region, which is expected to eventually make Brazil one of the world's top crude exporters. But the put option, which had not been disclosed to Petrobras' board at the time of the purchase, created a legal battle between Petrobras and Astra over the refinery's future.

Astra eventually took Petrobras to binding arbitration to enforce the put option, with Petrobras forced to pay Astra an additional $821 million to settle the dispute. Petrobras first put the refinery on the sales block in 2010, but the plant yielded little interest from US refiners.

Petrobras operated the refinery at a substantial loss for several years as refining margins cratered, but results improved after US shale output started to soar earlier this decade. The company also decided not to carry out a previously planned overhaul of the refinery and reduced other investments at the facility, which critics say has led to issues with accidents and emissions. Petrobras has been fined several times by Texas authorities for problems at the refinery.

The sale also underscores Petrobras' desire to reduce its role in refining, especially in Brazil. Petrobras operates about 98% of Brazil's 2.3 million b/d refining capacity, but has plans to sell off four refineries accounting for about 25% of processing capacity under a $26.9 billion divestment plan for 2019-2023.

The company is also in talks with China's CNPC to complete the Complexo Petroquimica do Rio de Janeiro, also known as Comperj. The 165,000 b/d refinery is about 85% complete, but work was halted in 2015 until Petrobras finds a partner to finish construction.

The administration of President Jair Bolsonaro, who took power January 1, wants to use Petrobras' divestment program as a way to open up Brazil's refining market to greater competition, which eventually should lead to lower prices for consumers. Bolsonaro's choice for chief executive at Petrobras, Roberto Castello Branco, was tasked with carrying out the refinery sales.

In early January, Castello Branco said that Petrobras felt "lonely" in Brazil's refined-product market and welcomed more competition.


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Edited by Jeff Fick; Edited by Jeff Mower from Platts / SPGlobal.

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