(Update details on raids, prosecutors goals, background on Pasadena purchase throughout)
By Sergio Spagnuolo
CURITIBA, Brazil Nov 16 (Reuters) - Brazilian police and prosecutors investigating corruption at Petroleo Brasileiro SA said on Monday they have evidence that bribes were paid as part of the state-run oil company's $1.2 billion purchase of Pasadena Refining Systems Inc in 2006.
At a news conference announcing a new round of searches, seizures and arrests, federal prosecutor Carlos Fernando dos Santos Lima said the bribes related to the U.S. Gulf Coast-based refinery could lead to the cancellation of the purchase.
After Monday's police operation, two were arrested and five brought in for questioning, prosecutors said, the latest twist in a nearly 20-month probe of price-fixing and political kickbacks at the company known as Petrobras.
"This case is important because, who knows, we might be able to annul the sale or recover assets belonging to the Brazilian public," Lima told reporters in Curitiba, Brazil where the investigation is being run.
The prosecutor did not say how a U.S.-based transaction could be canceled, but throughout the corruption prosecution, serious efforts have been made to return illegally diverted funds to the government or Petrobras.
The prosecutor said Petrobras lost $792 million in the purchase of the 100,000-barrel-a-day refinery from Astra Oil, a unit of Belgian-controlled Astra Transcor Energy. He also alleged that Petrobras overpaid for the facility, claiming it was in terrible condition when acquired.
Petrobras paid $360 million for half of Pasadena Refining in 2006, more than eight times what Astra paid for the whole refinery a year earlier. By 2012, Petrobras had sunk $1.18 billion into it including the cost of buying out Astra's remaining half after a legal dispute between both firms.
Lima cited evidence that Astra paid $15 million in bribes in the sale of the initial 50 percent of the Pasadena refinery to Petrobras in 2006.
Petrobras bought the refinery as its exports of Marlim-grade heavy crude and other oil blends grew, largely to the United States. It was hoping to capture extra profit for those exports by refining those exports into fuels such as gasoline. A congressional inquiry found that it paid far too much for the refinery.
"Besides being obsolete and in a terrible state, the refinery did not have the capacity to refine Marlim crude produced by Petrobras," a statement by the prosecutors said.
In Houston, a voice mail request for comment to Astra Oil Company LLC was not immediately answered. An Astra Transcor Energy employee in Rotterdam declined to comment. A corporate affairs official in Zug, Switzerland did not immediately return calls requesting comment.
Petrobras officials did not comment. (Additional reporting by Guillermo Parra-Bernal, Pedro Fonseca, Jeb Blount and Anthony Boadle in Brazil, Joshua Schneyer in New York and Marianna Parraga in Houston; Writing by Jeb Blount; Editing by W Simon and Christian Plumb)