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Brazil's watchdog TCU looking at
Petrobras refinery sale over price


Petrobras refinery sale under price scrutiny by The TCU, an administrative court that oversees federal spending

By Nathan Walters/Argus

Petroleumworld 04 06 2021

Brazil's federal spending watchdog TCU is analyzing the $1.65bn price for a refinery that state-controlled Petrobras is selling to Abu Dhabi's state-owned investment fund Mubadala.

On 24 March, after more than six months of negotiations, Petrobras' board approved the sale of the 333,000 b/d Landulpho Alves refinery (RLAM) in Mataripe, the first of eight that the company plans to offload in a major divestiture campaign. A sales and purchase agreement with Mubadala Capital was signed on the same day, the company said.

The TCU, an administrative court that oversees federal spending, has been engaged with the refinery sales program since it was launched in 2019, Petrobras said.

In what has become a routine assessment of sensitive asset sales, court justice Walton Alencar last week set a five-day period to review technical data underpinning the price before deciding on a request to grant an injunction that would stop the transaction. Alencar ordered the court's technical team to submit a conclusive analysis after questioning whether the sale would cause "possible damage to the public interest".

"The company will provide TCU with the additional clarifications necessary to complete the surveillance of the refinery sale," Petrobras said of the court's request.

Previous such assessments have concluded in favor of Petrobras.

Opposition politicians, many from the Workers Party (PT), and oil labor federation FUP have ramped up legal challenges to the sale they say is below market value. They view the asset sales as a piecemeal privatization of Petrobras.

According to FUP-aligned energy think-tank Ineep, the market value of RLAM is $3.10bn-3.81bn.

Opponents are hoping to win an injunction in the federal court of Bahia state, where RLAM is located.

Mubadala has not commented on the transaction.

Lightning rod

Petrobras' asset sales have long stoked consternation among labor unions that fear job losses. But the refinery sales in particular have become a lightning rod since former president Luiz Inacio Lula da Silva had his political rights restored by two supreme court decisions last month. The two-term PT leader has warned potential buyers that Petrobras deals concluded now could be revoked if he wins a third term in 2022.

Lula's critique of the open downstream market Petrobras says is necessary to attract investment has compounded pressure on incumbent president Jair Bolsonaro, whose administration has been pushing through state asset sales and other economic reforms since he took office in 2019. But in recent months, Bolsonaro has thrown a wrench into Petrobras' market-based fuel pricing policy by triggering an overhaul of the company's management.

Petrobras' outgoing management sees the asset sales as critical to bringing down the company's heavy debt load and funding its strategic focus on pre-salt oil development.


By Nathan Walters from Argus Media
04 05 2021



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