By Luciana Magalhaes and Marta Nogueira
Rio de Janeiro (Reuters) – Brazil’s state-run oil company Petrobras is currently in the final stages of conducting due diligence for a potential bid to repurchase the Mataripe refinery, which it had previously sold to the Abu Dhabi sovereign fund Mubadala for $1.65 billion in 2021, according to sources familiar with the matter.
President Luiz Inacio Lula da Silva has been vocal in his opposition to the sale of Petrobras refineries, advocating for increased investments in job creation within the segment. However, negotiations regarding the structure and pricing of a potential buyback have yet to be finalized, leading to potential delays in the deal completion.
The sale of the Mataripe refinery, also known as RLAM, has raised concerns as it was believed to have been undersold, with some reports suggesting that it was sold below market value. The Comptroller General of Brazil found indications that the refinery may have been sold at a discount during the COVID-19 pandemic, while the Institute for Strategic Studies in Oil, Natural Gas and Biofuels estimated its value to be between $3 billion to $4 billion in 2021.
Discussions surrounding a possible buyback emerged when Mubadala proposed a joint investment in traditional refining as well as a new biorefinery that would share infrastructure with the Mataripe refinery in Bahia state, a stronghold of Lula’s Workers Party.
Brazil’s Mines and Energy Minister Alexandre Silveira expressed his opposition to the sale of refineries and emphasized the need for economically viable agreements. Petrobras has been considering different structures for the buyback, including acquiring an 80% stake in Mataripe and making a minority investment in a biofuel plant with Mubadala. However, uncertainties remain following the appointment of a new CEO by Lula in May.
Petrobras has explored the option of offering Mubadala the same price it paid for the refinery in 2021, along with interest and reimbursement for the sovereign fund’s investments in updating the plant. The company currently owns 11 refineries that account for about 80% of domestic fuel production, following the sale of two plants under former President Jair Bolsonaro’s administration.
Built in the 1950s, RLAM stands as Brazil’s second largest refinery with the highest capacity for gasoline, diesel, and oil derivative production in the north and northeast regions of the country.
Analysts suggest that Mubadala’s decision to sell RLAM stems from the expectation that Petrobras would divest more refineries, leaving the sovereign fund with a smaller share of the refining market in Brazil. Industry experts believe that a buyback of the refinery is essential for the private investor like Mubadala to exit the Brazilian refining sector.
In conclusion, the ongoing discussions between Petrobras and Mubadala regarding the potential buyback of the Mataripe refinery highlight the complexities of the energy market in Brazil. The outcome of these negotiations could have significant implications for the country’s oil industry, investment landscape, and overall economic growth. It is crucial for investors and stakeholders to closely monitor the developments in this deal to assess its impact on their financial strategies and portfolios.