RIO DE JANEIRO Oct 28 Brazil's state-run oil
company Petrobras has proposed a new fuel-pricing plan, hoping
to generate more cash and cut debt levels by improving the
timing of gasoline and diesel price adjustments, Chief Financial
Officer Almir Barbassa said on Monday.
The new policy, once it is in place, will set automatic fuel
price rises or cuts, Barbassa told investors, analysts and
reporters on a conference call to discuss third-quarter
earnings. Petrobras stock jumped on hopes the new system will
help the company cut debt that has ballooned because Petrobras
now sells imported fuel at a loss to keep domestic prices low.
He said the proposed pricing system will not change the
company's policy of targeting long-term international prices for
gasoline and diesel rather than short-term changes in global
The Brazilian government has tried to fight inflation by
preventing Petrobras, known officially as Petroleo Brasileiro SA
, from raising gasoline and diesel prices in line with
world market prices. The price gap has increased in recent
months as Brazil's currency, the real, has weakened against the
U.S. dollar. Because of the policy, all imported fuel is sold at
a loss in Brazil.
The resulting reduction in income, exacerbated by the need
to boost fuel imports to make up for rising domestic demand and
a cut in the amount of ethanol used in gasoline blends, has led
the company's debt to balloon by more than a third to 250.9
billion reais ($112.5 billion) in the 12 months ending Sept. 30.
"The new policy will provide predictability and help us
reduce our debt levels," Barbassa said, adding the policy is
under final study and will be presented to the board by Nov. 22.
Preferred shares of Petrobras, the company's most-traded
class of stock, rose 6.9 percent and common shares
gained 8.5 percent in early afternoon trading in Sao Paulo.
Barbassa said the change in policy does not mean a gasoline
price increase, long awaited by the market, is imminent.
"The new policy will still target long-term prices,"
In 2002, former Brazilian President Luiz Inacio Lula da
Silva, current President Dilma Rousseff's predecessor, ended a
short experiment with world-market pricing. He moved Petrobras
to the current system under which the company would avoid
raising domestic prices when world prices rose but also avoid
fuel-price cuts when world benchmark prices fell.
But prices have trended upward in recent years. Brazil has
let Petrobras charge more but has slashed wholesale fuel taxes
to help keep domestic prices steady. Taxes hit zero, however,
and recent permitted price increases have narrowed but not
closed the gap with international prices.
The most recent price increases have been largely swallowed
by the weaker real, which made fuel imports more expensive in
The sustained increase in global prices and continued
reliance on imports has saddled Petrobras with more than 30
billion reais of refining-unit losses since the beginning of
2012, crimping its ability to pay for a $237 billion five-year
A long-delayed oil refinery being built on Brazil's
northeastern coast could help reduce Petrobras' dependence on
imported gasoline. The so-called Abreu e Lima refinery is now 82
percent complete, Jose Carlos Cosenza, Petrobras' director of
refining and supply said.
Petrobras is studying raising the capacity of the Abreu e
Lima refinery now that Venezuela's PDVSA is no longer partner in
the project, Cosenza said on Monday.
The refinery was originally conceived to process 230,000
barrels of heavy crude from Venezuela's massive Carabobo field,
but now Cosenza said Petrobras plans to refit it to handle
lighter crude at greater volumes from Brazil's Campos Basin.
Cosenza said the recalibration to handle lighter crude
"would not carry any additional costs" for Petrobras. The Abreu
e Lima's price tag is estimated at $18 billion.
Petrobras last month abandoned a partnership with Venezuelan
counterpart PDVSA, which was supposed to finance the project
with the Brazilian company, and said it would finish the
PDVSA had wanted to sell some of the fuel produced at the
refinery abroad, but Petrobras said its requirements under
Brazilian law made exports unlikely. Venezuela can get more
money selling its refined crude outside of Brazil than in it.