RIO DE JANEIRO: The outlook for cutting money-losing fuel imports at state-run oil company Petrobras dimmed after Brazil’s petroleum regulator said it plans to tighten safety rules and that repairs at the damaged REPAR Refinery will only partly restore capacity.
The new safety regulations, scheduled to take effect in January, will tighten inspection and maintenance rules at the country’s 13 refineries, all controlled by Petrobras, Waldir Martins Barroso, the director responsible for refining at regulator ANP, said.
And the REPAR refinery, shut down since a fire broke out on November 28, will only be restored at about two-thirds its normal capacity, he added. The refinery, in the southern state of Parana, processed about 200,000 barrels of crude a day before the fire.
Combined, the two developments mean even more reliance on imported fuels at a company that is already losing money on every barrel of fuel it buys abroad.
“Petrobras is getting further and further behind demand,” said Michael Wojciechowski, head of oil refining, processing and distribution research in the Americas for Wood Mackenzie in Houston. “Any lack of refining capacity just exacerbates the market distortions and need for imports.”
The new maintenance rules, Wojciechowski said, could increase refining capacity medium term by making the refineries safer and less likely to have outages. As it moves to comply with the new rules, though, Petrobras will likely face more shutdowns.
“In the short term, it is going to be a negative,” he said. “They will need more imports”
Emergency or scheduled refinery outages have a serious impact on Petrobras’ profit. Its refineries are unable to meet all of domestic demand and government rules, meant to curb inflation, force the company to sell imported fuel at less than world market prices for gasoline and diesel.
As a result, Petrobras’ refining division has lost more than 30 billion reais since the start of 2012. The losses have reduced cash available to finance a $237 billion five-year investment plan and made it harder to justify new refinery construction.
The new refinery regulations are modeled on safety and environmental rules mandated for offshore oil platforms. Those rules forced the shutdown of several platforms and were one of the reasons behind the two-year stagnation of domestic crude output. “The refinery rules are a mirror image of the oil platform rules,” said Barroso.
Petrobras refineries will have two years to comply.
Two refineries under construction, one near Recife in Brazil’s Northeast and one near Rio de Janeiro are years behind schedule. Two more are on hold while the company reassesses its financial plans and tries to cut costs.
The problems in restarting the REPAR Refinery are the result of damage to the atmospheric distillation and refrigeration units, Barroso said.
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