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Petrobras defends heavy oil refinery deal that lost $530 million

ANNA EDGERTON and PETER MILLARD

RIO DE JANEIRO (Bloomberg) -- Petroleo Brasileiro SA, facing a growing scandal over its $1.2 billion purchase of a refinery in Texas, said it bought the plant to maximize returns on heavy oil that it couldn’t refine in Brazil.

The Pasadena plant still had good margins in 2008 when Petrobras began to negotiate increasing its stake, CEO Maria das Gracas Foster told a Brazilian congressional commission today. The state-run company recognized a $530 million loss from the deal, she said.

Opposition lawmakers are pushing for a formal investigation into the 2006 purchase from Astra Oil Trading NV, which Foster said paid at least $360 million for the plant. President Dilma Rousseff, then Petrobras’ chairwoman, said last month that directors approved the $370 million purchase of a 50% stake without knowledge of a clause that later forced it to buy the rest as part of a $820.5 million legal settlement.

“Pasadena turned into a business that isn’t good for us” after margins fell, Foster said.

The outcry over the acquisition is shining the spotlight on Petrobras’s runaway refining investments and project delays that contributed to 17.7 billion reais ($7.7 billion) in losses for the unit last year. Petrobras, which loses money on fuel sales because of government price caps, is working to make domestic and foreign prices converge over time, Foster said.

Opposition members collected enough signatures this month to create a separate commission to investigate the Pasadena deal, prompting government-allied senators to propose a wider commission to also look into projects that affect the two main opposition parties. The senate could decide today to increase the scope and to include representatives from the lower house.

The court that oversees government spending and the Public Ministry is already investigating Petrobras for the purchase of the refinery. The state-run company said it’s collaborating with government agencies and created its own committee to investigate.

04/15/2014

 

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