Petrobras sells assets but still dominates the fuels market

The Presidente Getúlio Vargas (Repar) refinery in Paraná is among the units expected to be sold by Petrobras. Photo: Agence Petrobras

Despite the fact that the breaking of the monopoly of the oil industry in Brazil ends its 25th anniversary in 2022, Petrobras still retains, in practice, control of the country’s fuel market. The successive increases in the price of gasoline, diesel and cooking gas throughout 2021 could be less if there was more competition in the refining market, according to specialists.

In recent years, the company has sought to reduce its portfolio of assets. In 2011, when the oil company launched a strategic business divestiture plan, it had already sold more than 80 assets, according to a survey by the Single Federation of Petroleum Workers (FUP).

Last year, for example, Petrobras finalized the sale of Liquigás to the consortium formed by Copagaz, Itaúsa and Nacional Gás. Last June, Petrobras sold the 37.5% stake it still held in BR Distribuidora since the start of the privatization process in July 2019.

The objective of the operations is to open the market to competition in certain segments and, at the same time, to free up liquidity to reduce the indebtedness of the company. In this sense, Petrobras has also abandoned participation in specific markets, such as power generation and fertilizers, to focus its activities on exploration and production of oil in deep waters.

Last year, the sales processes for Araucária Nitrogenados SA (Ansa) and the Nitrogenous Fertilizer Unit III (UFN-III) resumed. Last November, the company finalized the sale of its 20% stake in Termelétrica Potiguar (TEP) and 40% in Companhia Energética Manauara (CEM).

The opening up of the market and the sale of dozens of assets in recent years are some of the arguments used by current Petrobras chairman, Joaquim Silva e Luna, to counter criticism of the company’s pricing policy. “We are strengthening it: there is no monopoly. Petrobras is not the only supplier on the market. Assigning a fuel price to Petrobras is not correct, ”Silva e Luna said in a recent public hearing.

Consumer fuel prices rose 50.43% in 2021, according to the National Extended Consumer Price Index (IPCA) in November. The company justifies the readjustments of the refineries, in line with the world market, by the need to import around 20% of what is consumed in Brazil, the refineries not being able to meet the internal demand for derivatives. But, almost without competition, the company ends up hampering private investment in new refineries and dictating the value of the products that are sent to distributors.

The public company was even the target of the Administrative Council for Economic Defense (Cade), which was investigating, as part of an administrative investigation, allegations of abuse of a dominant position in the refining market. In 2019, the company signed an agreement, which suspended the investigation, by which it committed to sell eight oil refineries, in addition to the assets related to the transportation of fuel. The deadline for divestment was two years, but amendments postponed the validity of the agreement.

Petrobras participation in fuel refining

Until this year, 13 of the 17 refineries operating in Brazil belonged to Petrobras, which concentrated almost the entire refining market. From January to September 2021, state-owned refineries accounted for 98.9% of the country’s total production of petroleum products, with 479.9 million of the 485.2 million barrels refined domestically, according to data from the National Agency for Petroleum, Natural Gas and Biofuels. (ANP).

Together, the privately owned Dax Oil, Manguinhos, Riograndense and Univen refineries accounted for just 5.3 million barrels, or 1.1% of production for the period.

On October 1, ownership of the Landulpho Alves (RLAM) refinery operation in Bahia was transferred from the state-owned company to the Mataripe refinery, controlled by Acelen, of the Mubadala fund. Even so, that month Petrobras accounted for 86.2% of all refining in the country, with 52.5 million of the 60.9 million barrels refined.

In addition to RLAM, the Isaac Sabbá refinery (Reman), in Amazonas, and the Shale Industrialization Unit (SIX), in Paraná, have already signed their sales contracts, but the divestiture process has not yet been concluded. According to Petrobras, when the transfer of operations is completed, the state-owned company will be responsible for about 50% of the supply of the fuel market in the country.

The company has also undertaken to sell Lubricants and Petroleum Derivatives from the North-East (Lubnor), to Ceará; Abreu e Lima (Rnest), in Pernambuco; Gabriel Passos (Regap), in Minas Gerais; President Getúlio Vargas (Repar), in Paraná; and Alberto Pasqualini (Refap), in Rio Grande do Sul.

“Even if the eight refineries agreed with Cade were successfully sold, Petrobras would remain the country’s refining leader, with a presence in major markets, particularly in the Southeast,” said economist Ilan Arbetman, oil and gas analyst at Activates Investments. . “The power of pricing [formação de preços] of Petrobras would remain high, it would continue to be a price factor [formadora de preços]. “

For him, a possible privatization of Petrobras, as has been defended by the authorities in recent months, would not change the fuel market, especially with regard to the price of products. The refining sector, which today is practically a state monopoly, would only become so in the private sector.

Conrado Magalhães, of Guide Investimentos, recalls that the price dynamics practiced by Petrobras are closely linked to the fact that Brazil is not self-sufficient in oil refining to supply the domestic market.

“Part of the problem with this lack of refining comes from this monopoly. The private sector is reluctant to invest in this space because it has a public company that can absorb the profits, ”he said. “The momentum that is pushing prices up now wouldn’t be better with a privatized Petrobras.”

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