Page 5 - LatAmOil Week 34 2022

LatAmOil COMMENTARY LatAmOil

They were commenting in response to reports Sales reach non-binding stage
that the National Agency of Petroleum, Natu- That doubt was not immediately evident.
ral Gas and Biofuels (ANP) was gearing up to Indeed, Petrobras announced in a statement
present proposals for phasing out the use of S500 on August 19 that it had officially launched the
diesel, which has a sulphur content of 500 ppm, non-binding stage of the sales process for the
within the next few months. two refineries, along with RNEST.
ANP is expected to ban S500 diesel in favour Specifically, it said it had given potential
of S10 fuel – that is, 10 ppm ultra-low-sulphur buyers the green light to participate and submit
diesel – by 2025. However, it has not yet set offi- non-binding offers in the upcoming tenders for
cial deadlines for the switch. these plants.
The NOC did not say when these tenders
Shift in refinery valuations would go forward, but it did indicate that there
The new emissions standards will have a bearing was no thought of cancelling or delaying the
on the refinery sales because some of Petrobras’ sales. This is a sensitive point, given that Petro-
downstream plants do not have the ability to bras is now making its second attempt to sell all
produce diesel that meets the stricter specifica- three refineries.
tions, the sources explained. As such, once the Nevertheless, the sources also noted that
new requirements take effect, Petrobras may questions stemming from diesel emissions
have to accept lower valuations for these plants, standards were compounding the concerns
which the new owners will have to upgrade at raised by Brazil’s upcoming presidential elec-
high cost in order to remain in compliance with tions. The current front-runner in that race Questions
local regulations, they said. is Luiz Inacio Lula da Silva, a leftist candidate
According to the sources, this shift is likely who has made it clear that he opposes the sale of stemming from
to have the biggest impact on the REFAP and Petrobras’ refineries.
REPAR plants. Neither of these two refineries As of press time, neither Petrobras nor ANP diesel emissions
is currently focused on turning out S10 diesel, had commented on the matter. ANP has not
they noted. said when it might clarify its schedule for intro- standards are
One oil industry executive, for example, told ducing new emissions standards, and Petrobras compounding the
Reuters that he expected “REFAP and probably has not said whether it expects the phase-out of
other refineries [to] face problems” as the priva- S500 diesel to affect refinery sell-offs. (The NOC concerns raised
tisation process moved forward. These problems claims that S10 fuel already accounts for more
stem from REFAP’s inability to produce S10 die- than 50% of its total diesel sales.) by the upcoming
sel on any large scale, he explained. Overall, Petrobras is probably feeling more
In the case of REPAR, the obstacles may pressure than it did a few weeks ago, when elections
prove less formidable, according to a second Araujo spoke to Argus Media.
industry executive, who spoke to the news Even if the NOC is talking publicly about
agency on condition of anonymity. “REPAR moving to the next stage of the sale, the fact that
already makes a small amount of S10, so who- the new emissions standards are on the horizon
ever buys it would need to invest in an adapta- does have the potential to change refinery valua-
tion – not in a conversion, which would require tions – and, therefore, the amount that the com-
a lot more money,” he said. pany stands to earn through the sales, which are
Even so, all the sources pointed out that part of a sell-off campaign designed to generate
questions about the fate of REFAP and REPAR at least $20bn in revenue.
were particularly relevant because Petrobras Moreover, they have the potential to make
has been in talks with potential buyers and had potential investors rethink the advisability of
hoped to sign confidentiality agreements earlier sinking large amounts of money into an asset
in August. Those deals are now in doubt due to that will have to be improved, at significant
uncertainty about the new emissions require- expense, in order to continue producing diesel
ments, they claimed. fuel. ™

The REPAR refinery already produces small amounts of S10 diesel (Photo: Petrobras)

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