Petrobras decides to complete the Abreu e Lima refinery, the pivot of the scandal at Lavo Jato

After failing to sell the Abreu e Lima Refinery, in Pernambuco, Petrobras decided to resume investments to complete the works on the unit, which had been suspended after the start of Operation Lava Jato.

The expansion is part of a budget of US$ 2.6 billion (R$ 14.5 billion, at the current price) provided for by the state-owned company’s new investment plan in its refining park, which intends to increase the production capacity of diesel less pollutant in Brazil.

Known as Rnest, Abreu e Lima remains in the Petrobras asset sale plan, but the company’s management believes that the fact that it was not concluded weighed on the negotiations with interested parties, which were closed in August.

“We believe that the completion of the work will add value to the asset, enabling successful disinvestment,” said Rodrigo Costa, in a virtual conference with analysts this Thursday (25th), the director of Refining and Gas at the state-owned company.

The plan foresees US$ 1 billion (R$ 5.6 billion) for Rnest, for the expansion of its first refining unit and installation of the second, which was foreseen in the original project but ended up being abandoned after the start of investigations into corruption in the construction.

Today, the refinery has the capacity to process 115,000 barrels of oil. With the new contributions, Petrobras hopes to expand this capacity by 145 thousand barrels per day. The production of S-10 diesel, with a lower sulfur content, at the unit will grow by 95 thousand barrels per day.

Rnest was designed during the Lula government as part of a bilateral investment agreement with Venezuela, still under the command of Hugo Chávez. The original project called for a unit to process the heavy oil produced by the Venezuelan state-owned company PDVSA.

The project was the target not only of Lava Jato, but of processes at the CVM (Securities Commission) and at the TCU (Court of Accounts of the Union), which even launched a publication on its performance in the case, called “Rnest Management: a story that needs to be told not to be repeated”.

The document sets out to show “how a virtuous and promising idea can turn into a billionaire commercial failure” and “how an extremely sophisticated theoretical system of governance and compliance can be subverted to the point of entangling the entire top management of a company”.

Abreu e Lima is Petrobras’ most modern refinery, with operations starting at the end of 2014. “It’s a work in progress,” says Petrobras’ Financial Director, Rodrigo Araújo. “For foreigners, it is a work that Petrobras itself is more able to complete.”

At the conference with analysts, Araújo said that the investment proposal at the conclusion is viable and gives a return to the state-owned company, but the project is still being analyzed by the internal governance bodies and will also undergo a more detailed financial assessment.

Launched on Wednesday (24), the investment plan for the next five years is focused on the exploration and production of oil and gas, which will receive 84% of the US$ 68 billion (R$ 381 billion) planned for the period.

But it surprises by bringing new investments in refining, a segment in which Petrobras announced its intention to significantly reduce its participation, with the sale of 8 of its 13 units, a process that was later endorsed in an agreement with Cade (Administrative Council for Economic Defense) .

In addition to Rnest, other expansion projects are planned for units that the state-owned company intends to keep in its portfolio, the Paulínia Refinery (SP), the Duque de Caxias Refinery (RJ) and the Henrique Lage Refinery, in São José dos Campos (SP).

The expansion works in the three will increase the production capacity of diesel S-10 by 132,000 barrels per day, says the state-owned company.

The plan also foresees the integration of the Duque de Caxias Refinery to the GasLub Pole, formerly Comperj (Rio de Janeiro Petrochemical Complex), for the production of oils for lubricants, S-10 diesel and aviation kerosene.

Comperj was also one of the main projects investigated by Operation Lava Jato. It would be a refinery complex and companies in the petrochemical sector, but today it is focused on receiving and processing natural gas from the pre-salt.

Petrobras and the government of Rio de Janeiro are trying to transform the area into an industrial district aimed at businesses that consume natural gas, such as the chemical, fertilizer, glass and ceramic industries, for example.

Petrobras’ Refining Director said that the expansion of the state-owned units will not eliminate the need to import fuel across the country. He believes, however, that buyers of the refineries that are currently for sale will also invest in expansions.