Brazil is now a major oil exporter. If until 2009 the country was self-sufficient or a slight importer, with the entry of production from the pre-salt fields this reality changed radically.
In 2021, our net oil exports totaled US$26.6 billion. Brazil’s position as a major net exporter of oil is consolidated and will increase over the next decade.
However, when we look at the derivatives situation, we are net importers. Since 2010, the oil derivatives balance deficit has been US$ 7 billion, without major variations. For example, in 2021 the derivatives trade balance deficit was US$ 7.6 billion.
It could make sense for us to increase our refining capacity and, instead of exporting raw materials, become exporters of derivatives. We would add value to production.
The difficulty is with “adding value”. For the refining activity to add value, the earnings need to offset operating expenses, but also investments in refineries.
In the 2000s, Petrobras invested enormously in the installation of refineries and, consequently, to increase the company’s refining capacity.
The refining investment series is available on the state-owned company’s website. The base is in current dollars and annual frequency since 1954, Petrobras’ first year of operation.
To obtain a series of the company’s investment since 1954 at constant prices, we used as a price index the inflation for the US specific to non-residential equity investment. In technical language, we use the non-residential fixed capital investment deflator from the US national accounts.
In order to have an idea of the effectiveness of the investment, we obtained, on the ANP (National Petroleum Agency) website, the series of refining capacity measured in number of barrels of oil per day. The numbers are impressive.
From 1954 to 2002, Petrobras’ total investment in the refining area was US$ 27 billion. From 2002 to 2016, it was $101 billion. All values in 2012 dollars. The state-owned company’s refining capacity was 2 million barrels per day in 2003. In 2020, it was 2.41 million.
In the first period, each barrel per day of refining capacity cost US$ 13,227 and, in the second period, it cost R$ 263,747, 20 times more.
In a text with my colleagues Adriano Pires and Luana Furtado on the FGV Ibre Blog, we document that the cost today of increasing refining capacity by one barrel per day is between US$ 15,000 and US$ 30,000. Surely $250,000 is nonsense, as my grandmother used to say.
At these costs, it will be impossible for us to be exporters of oil derivatives. Or we will only be if the gains from the refining activity are negative, that is, if they remove value from the country.
Either we can substantially reduce the costs of installing refining capacity in Brazil or we will continue to be an exporter of crude oil.
The column title question needs to be answered before we attempt a new refinery investment cycle. Perhaps it would be more effective to change the entire regulation of the sector so that the construction of refineries, if and when it is profitable, is in the hands of private companies.
In the blog post there is the link to access the Excel file with all the data, as well as the link to access the original data.
I have over 8 years of experience in the news industry. I have worked for various news websites and have also written for a few news agencies. I mostly cover healthcare news, but I am also interested in other topics such as politics, business, and entertainment. In my free time, I enjoy writing fiction and spending time with my family and friends.
