India's Essar, Brazilian firms consider bid for Petrobras' refinery

Brazil's Petroleo Brasileiro SA is set to receive binding offers on Dec. 10 for its Rio Grande do Sul state refinery Refap, with Indian conglomerate Essar Group and local firms Raizen and Ultrapar Participacoes SA among its potential bidders, people familiar with the negotiations said.

All three companies have been pre-qualified for the binding phase for Refap refinery, also known as Alberto Pasqualini, the sources added, declining to be named as the details are confidential.

Petrobras, as Brazil's state-controlled producer is known, will also receive offers on the same day for its Parana state refinery - Presidente Getulio Vargas, or Repar - as part of a rebidding sale process. In September, both Raizen and Ultrapar delivered bids that were too similar in value.

Petrobras, Ultrapar and Raízen declined to comment. Essar did not immediately respond to a Reuters request on the matter.

The bids are part of Petrobras's plans to end its virtual monopoly in refining in Brazil and open one of the largest fuel markets to private competitors. Nine refining units are for sale, or about half of Brazil's refining capacity.

Seeking bids for two refineries on the same day is a switch in strategy by Petrobras aimed at boosting competition for the assets - and also potentially generating higher offers.

Both Refap and Repar are located in Brazil's southern region and have a production capacity of 200,000 barrels per day each, or about 18% of the country's capacity. In accordance with antitrust rules, the units cannot be bought by the same firm after a divestiture by Brazil's state-controlled oil company.

The latest Petrobras attempt to privatize its refineries suffered long pauses as the divestments were questioned in court and international fuel demand and oil prices plunged during the pandemic.

Work in progress

This week, Petrobras will also receive offers for its so-called Lubnor refinery, in Brazil's northwestern region, with a processing capacity of 8,000 oil barrels per day.

Currently, Petrobras is in exclusive negotiations with Abu Dhabi's Mubadala Investment Co for the sale of its second-largest refinery, known as Rlam. Essar has also bid for Rlam and may restart negotiations with Petrobras in case of a rebid.

Petrobras said last month it has received binding offers for its Reman refinery, in the Amazonian city of Manaus.