26 de febrero de 2014 / 16:18 / en 4 años

UPDATE 2-Brazil's fuel self-sufficiency hinges on price hikes -Petrobras

By Jeb Blount and Walter Brandimarte

RIO DE JANEIRO, Feb 26 (Reuters) - Brazil could become self-sufficient in gasoline, diesel and other fuels by 2020 if state-run oil company Petrobras is allowed to bring domestic fuel prices in line with world prices that will help fund new refineries, company executives said on Wednesday.

Petroleo Brasileiro, as the company is formally known, expects refining capacity to rise 50 percent to 3 million barrels per day (bpd) by 2020 and nearly a third more to 3.9 million bpd by 2030, helping eliminate a growing dependence on U.S. and Indian refineries, according to planning documents released late Tuesday.

Current Petrobras refining capacity is about 2 million bpd and insufficient to meet rising domestic demand, a situation that has forced it to boost imports. Government fuel-price controls, aimed at controlling inflation, have forced Petrobras to subsidize domestic consumers.

With every barrel imported being sold at home at a loss, Petrobras’ refining division has been hit with 37 billion reais ($15.7 billion) of losses in the last two years.

Petrobras cut its refining unit budget under the company’s overall $221 five-year, 2014-2018 investment program. The $38.7 billion allocated, 40 percent less than in the 2013-2017 plan, must pay to complete two refineries under construction and begin building of two low-sulfur diesel refineries.

But as subsidies drain cash, Petrobras’ debt has soared. Without fuel price “convergence,” raising the money needed to finance refining and other plans will be difficult, Chief Executive Maria das Graças Foster said on Wednesday.

“We can’t improve our investment situation without a convergence in fuel prices,” she told investors and reporters during four hours of conference calls in Rio de Janeiro.

Preferred shares of Petrobras, the company’s most-traded class of stock, fell 3 percent to an eight-year-low close of 13.73 reais in Sao Paulo. Shares have fallen over 30 percent in the past three months in the wake of smaller-than-expected government-sponsored increases in fuel prices.

”The Petrobras share price reflects many years of poor performance and could potentially look cheap in 2015, if it delivers on production - we think so - and on domestic pricing - we’re not that sure, said Vinicius Canheu and Andre Sobreira, oil and gas analysts with Credit Suisse in Sao Paulo in a note to ivestors.

According to the plan, Petrobras net debt will fall below the company limit of 2.5 times earnings before interest, taxes, depreciation and amortization in 2015 if it can get fuel-price convergence within the next two years.

Debt will then decline to less than 2 times EBITDA by 2018.


So far, convergence in prices is still a long way off. Despite two increases in the price of gasoline and three for diesel in 2013, the gap between domestic and international prices remains wide, about 11 percent for gasoline and 19 percent for diesel, according to Deutsche Bank.

Some analysts worry that even with price convergence, spending on new refineries will rob money from oil production and exploration, the most important weapon Petrobras has against its giant $114 billion debt, the highest of any oil company.

“Refining investment in Brazil has achieved low returns due to high construction costs,” Luiz Carvalho and Felipe Gouveia, oil and gas analysts with HSBC in Sao Paulo wrote in a report Wednesday.

The pair believes the two low-sulfur diesel refineries, Premium I and Premium II, will be built but will do little to help to the company’s investment position. They say that Petrobras will likely have negative cash flow until at least 2020, five years longer than Petrobras’ plans promise.

Petrobras officials voiced confidence that the refining problems will be overcome.

Demand for fuels is expected to grow 2.5 percent a year during the 2014-2018 period, and 2.2 percent a year between 2019 and 2030. Demand is seen reaching 3.7 million bpd by 2030, the company said.

Petrobras is counting on the new refineries to boost results of the refining unit as a whole.

“The new refineries will have the latest technology to improve the efficiency of our refining system as a whole,” Chief Financial Officer Almir Barbassa told investors on a conference call to discuss fourth-quarter earnings.

Immediate results from new plants, though, may not be forthcoming, HSBC said.

Carvalho and Gouveia expect Petrobras to take a $12 billion charge against earnings in 2015 on the 235,000 bpd RENEST refinery. One of two under construction by Petrobras, the refinery cost nearly $20 billion and is expected to start operations at the end of this year.

Despite the Petrobras’ still-ambitious plans, the planning documents moved to check years of missed targets, soaring costs and rising debt by scaling back near-term investments and setting a limit on long-term growth.

The company said it plans to invest 94.6 billion reais ($40.4 billion) in 2014, 9 percent less than last year.

According the U.S. Energy Information Agency, Brazil will be the world’s sixth-largest oil producers by 2030. Brazil is also expected to be the single largest contributor of new-field oil output by 2020, according to WoodMackenzie.

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