Petrobras Nears Due Diligence on Mataripe Refinery Buyback

By Luciana Magalhaes and Marta Nogueira
RIO DE JANEIRO (Reuters) – Brazil’s state-run oil company Petrobras is concluding due diligence for a bid on the Mataripe refinery, which it sold to Abu Dhabi sovereign fund Mubadala for $1.65 billion in 2021, according to three sources familiar with the situation.

President Luiz Inacio Lula da Silva campaigned against Petrobras’s refinery sales and has urged the company to accelerate investments that create jobs. However, an agreement on the structure and price for a possible buyback remains unresolved, according to those involved in the discussions.

Delays in the negotiation, ongoing for several months, may arise because the refinery, known as RLAM, was reportedly sold below market value. Brazil’s Comptroller General found that Petrobras likely sold the refinery at a discount during the COVID-19 pandemic. A union-backed institute estimated in 2021 that the refinery’s worth ranged between $3 billion and $4 billion.

Petrobras has not responded to requests for comments, and Mubadala declined to comment.

The potential buyback discussions began last year after Mubadala proposed a joint investment in traditional refining paired with a new biorefinery that would share infrastructure with RLAM, located in Bahia state, an area strong in Lula’s Workers Party support.

Alexandre Silveira, Brazil’s Mines and Energy Minister, stated he opposes the sale of refineries, saying, “If you ask me if Brazil should have sold refineries, I would peremptorily respond: No.” He added that Petrobras would engage in an agreement only if the buyback is seen as “economically viable.”

Initially, Petrobras aimed to acquire an 80% stake in Mataripe and invest minority capital in a biofuel plant with Mubadala. However, after Lula appointed a new CEO for Petrobras in May, the future of this deal remains uncertain.

Petrobras is also considering offering Mubadala what it paid for the refinery in 2021, in addition to interest and reimbursement of the funds Mubadala spent to upgrade the facility, sources close to the talks have indicated.

Petrobras owns 11 refineries, which produce approximately 80% of Brazil’s domestic fuel, having previously sold two plants under former President Jair Bolsonaro, as part of a strategy to concentrate on deepwater exploration.

Constructed in the 1950s, RLAM is Brazil’s second-largest refinery, with the highest capacity for producing gasoline, diesel, and other oil derivatives in the north and northeast regions of Brazil, according to Acelen, the operator controlled by Mubadala.

Silveira noted that Mubadala aims to sell RLAM after acquiring it, expecting Petrobras to divest more refineries. However, the reality is that Mubadala now holds a minor segment of the refining market compared to Petrobras, which remains its crude oil supplier.

“This buyback will have to go through; it no longer makes sense for a private investor like Mubadala to own a refinery in Brazil,” remarked Adriano Pires, an oil industry analyst who was previously considered for a Petrobras CEO position in the last administration.