Brazil probe of Petrobras U.S. refinery misses bigger problem

Fri Apr 11, 2014 3:05pm EDT
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By Jeb Blount

RIO DE JANEIRO (Reuters) - The purchase of a Texas oil refinery by Brazil's state-run oil company has become a campaign issue as opponents of President Dilma Rousseff use it to attack her reputation as a no-nonsense manager and weaken her lead ahead of the October election.

Rousseff's congressional opposition has convinced their colleagues to open an investigation into Petroleo Brasileiro SA's $1.2 billion purchase of Pasadena Refining Systems Inc.

They say Petrobras paid 20 times the true value for the 100,000-barrel-per-day (bpd) refinery in Pasadena, Texas, and that Rousseff erred in approving the purchase when she was Petrobras' chairwoman in 2006.

The investigation, though, is probably focusing on the wrong refinery.

Even if Petrobras overpaid, the Pasadena refinery may turn out to be the best refining deal the company has made in at least three decades.

Petrobras is paying far more for new refineries in Brazil. The 230,000 bpd Abreu e Lima refinery near Recife, the first built in Brazil since 1980, is expected to cost $20 billion by the time it opens later this year.

Each barrel of new capacity at Abreu e Lima will cost Petrobras about $87,000, seven times more than at Pasadena and two to three times more than similar modern refineries being built elsewhere in the world.

Since Rousseff signed off on Abreu e Lima during her 2003-2010 term as Petrobras chairwoman, the cost has jumped more than four fold.   Continued...

Brazil's President Dilma Rousseff speaks during the first meeting of the newly-formed CIASN, an interministerial committee for simplifying tax collection, at the Planalto Palace in Brasilia, February 12, 2014. REUTERS/Ueslei Marcelino