UPDATE 2-Brazil seeks Chinese help building oil refineries

Thu Feb 28, 2013 3:07pm EST

Related Topics

* Two diesel refineries being built in northeast Brazil
    * Petrobras CEO currently negotiating in China
    * Part of Santos Basin platforms  to be made in China


    By Leonardo Goy
    BRASILIA, Feb 28 (Reuters) - Brazil's government said
Thursday it is seeking Chinese help to finish work on two oil
refineries, a sign of strengthening ties between the emerging
powers as well as financial troubles at state-run oil giant
Petrobras.
    Petrobras' CEO Maria das Gracas Foster was in China
negotiating a partnership with China Petroleum & Chemical Corp
(Sinopec) that would allow the company to finish
diesel refineries in two northeastern states by 2018.
    Petrobras is under pressure to build refineries and boost
its fuel output as Brazil's economy has boomed over the past
decade. But the company's cash flow is also under strain as the
government has forced it to sell gasoline at a loss in recent
years. 
    "Petrobras is facing a certain financial difficulty," Energy
Minister Edison Lobão told reporters in Brasilia. "I recommended
that its president go to China to negotiate with a large
state-run Chinese firm."
    He did not specify what shape the partnership might take,
what the financial details would be, or what Sinopec would gain.
     A Petrobras spokeswoman declined to provide further
information.
    China has recently agreed to invest in other oil producing
countries in exchange for guaranteed oil supplies. Industry
sources this month said Russia's state-owned Rosneft 
seeks to borrow up to $30 billion from China in exchange for
possibly doubling oil supplies. 
    This would not be Petrobras' first deal with China, which
recently became Brazil's largest trading partner. In 2009, China
Development Bank signed a $10 billion, 10-year loan deal with
Petrobras, under which the state-run oil company would supply
Sinopec with 200,000 barrels a day through 2019.
    Petrobras will also rely on China to build parts of four
platforms that will be placed in the off-shore Santos Basin, the
company said in a statement Monday.
    Though only 3 percent of the floating production, storage
and offloading (FPSO) vessels that will connect to the platforms
are being built in China, it was a rare sign of Brazil
outsourcing such work to the Asian giant to improve efficiency.
    Lobão said Foster would seek additional international
partnerships on other petroleum projects, including production
and exploration, in other countries.
    The company, which produces some 90 percent of Brazil's oil,
faces rising debt under the weight of a five-year, $237 billion
corporate investment plan, the world's largest. Searching for
cash, the firm is trying to sell some of its assets, including
most refineries located outside of Brazil. 
    Soaring costs and stagnant production led Petrobras to seek
a partnership with Venezuela's PDVSA to help build another
refinery in Pernambuco state seven years ago, but PDVSA has not
yet paid for its 40 percent stake in the Abreu e Lima refinery
that is supposed to begin operations this year.
    In September, Petrobras said it would seek help from South
Korean-American refiner GS Caltex to build Premium II, which
will likely cost $11 billion according to a report from the
Ceara state government's development agency. 
    Petrobras is trying to reduce its dependence on imported
fuels by building more domestic refineries. Premium II was
initially planned to transform Brazil's growing oil output into
"clean" diesel for export, but may be needed to meet surging
demand for vehicle fuels in Brazil.
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