Bloomberg News

Petrobras to Decide on Japan Refinery Sale Within 2 1/2 Years

November 07, 2011

Nov. 7 (Bloomberg) -- Petroleo Brasileiro SA will decide within the next two-and-a-half years whether to sell its Okinawa oil processing unit to help fund deepwater exploration in Brazil, the company’s chief executive officer said.

Petrobras, as the state-controlled Rio de Janeiro-based company is known, may sell the refinery along with other non- core assets in Japan operated by Nansei Sekiyu K.K. to build refineries, develop deepwater fields and increase output at its so-called Lula deposit southeast of Sao Paolo, Jose Sergio Gabrielli said.

“It is one possibility to sell Nansei Sekiyu,” Gabrielli said today at a news conference in Tokyo.

Petrobras hopes to raise $13.7 billion from asset sales, part of a total $224.4 billion that the company wants to invest in oil and natural-gas production at the Lula site, the largest crude discovery in the Americas since Mexico’s Cantarell field in 1976. The company is spending more than any other explorer to develop the fields that lie as much as four miles below the ocean floor trapped under a layer of salt.

He said a final decision hasn’t been made on whether to sell the refining unit, which can process about 80,000 barrels a day, yielding about 30 percent fuel oil that is supplied to utilities in Japan, he said. Gabrielli also declined to comment on whether the company was in talks with any potential buyers.

Petrobras bought 87.5 percent of Nansei Sekiyu from Exxon Mobil Corp. in 2008 for $50 million and acquired the remaining 12.5 percent stake last year from Sumitomo Corp.

Gabrielli said the refinery won’t complete modernization plans, meant to comply with new Japanese rules, if a stake in the subsidiary is not sold. Company officials estimated the works could cost as much as $1.5 billion.

The regulations are meant to compel oil companies to modernize refineries or cut capacity in an oversupplied market so they can compete more effectively with Asian rivals, according to the trade ministry.

--Editors: Raj Rajendran, John Buckley.

To contact the reporter on this story: Jacob Adelman in Tokyo at jadelman1@bloomberg.net

To contact the editor responsible for this story: Gearoid Reidy at greidy1@bloomberg.net


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