Petrobras tries to move on from its troubled past

. Feb 07, 2018
petrobras pasadena The Pasadena refinery cost Petrobras over $1.1bn
petrobras pasadena

The Pasadena refinery cost Petrobras over $1.1bn

On Tuesday, Petrobras announced its intentions to sell its oil refinery plant in Pasadena, Texas. The plant is a prime example of how corruption and poor administration have resulted in the near ruin of Brazil’s giant state-owned oil and gas company.

In 2006, Petrobras closed a USD 360 million deal to purchase 50 percent of the Pasadena refinery. The plan was simple and apparently logical: the Brazilian company would buy an obsolete (and thus cheap) refinery, revamp it, and adapt it to Brazil’s oil production. At a time when Brazil’s fuel consumption was down – and the U.S.’s was off the charts – it made sense on paper.

Yet it turned out to be what was arguably Petrobras’ worst deal. Ever.

</p> <p>While the motivations for the deal might appear fine on the surface, much of it becomes shady upon closer inspection. First: its value. Petrobras paid USD 360 million for half of a refinery that had been bought one year prior for just USD 42.5 million, making it a 3,000 percent profit for its previous owner, Belgium’s Astra Oil. By the way, the deal had the blessing of Citibank.</p> <p>By 2012, the Brazilian company had lost USD 1.18 billion, being forced to buy the remaining 50 percent from Astra Oil after a legal dispute.</p> <p>Petrobras’ former international director, Nestor Cerveró, told federal prosecutors that the deal occurred after construction companies (who would benefit from the transaction) paid roughly <a href="">USD 15 million in bribes</a> to executives and politicians. The case became one of the first major investigations within <a href="">Operation Car Wash</a>, and was the initial thread that led to arrests and multiple graft probes.</p> <p>The case then acquired an even larger dimension, as it happened when former President Dilma Rousseff was the chair of Petrobras’ board of advisors. Cerveró claimed that she was aware of the transaction’s details. Rousseff, however, claimed she greenlighted the deal after trusting several reports that recommended its approval.</p> <h3>Can Petrobras recover its money?</h3> <p>While the company didn’t specify how much it wants for the Pasadena plant, the amount won’t even begin to approach Petrobras’s original USD 1.18 billion price tag. According to a 2017 Bloomberg <a href="">report</a>, the 110,000-barrels-per-day processing unit would be valued today at USD 200 million – tops.</p> <p>The old refinery is the subject of numerous cases of environmental violations. In 2016, a fire broke out. In 2017, two environmentalist groups sued Petrobras for allegedly exceeding its permitted levels of pollution. Also last year, Harris County sued the refinery for “repeatedly violating Texas’s clean air and water acts.” At the time, Rock Owens, managing attorney of the Harris County Attorney’s Office, said that a sale wouldn’t affect the lawsuit.</p> <p>Petrobras already tried to find suitors for Pasadena last year. The company is undergoing a massive disinvestment plan. After selling off USD 13 billion of its assets between 2015 and 2016, it plans to sell off a further USD 21 billion through the end of this year.</p> <p>Ultimately, the Brazilian company is trying to break with its recent troubled past. But the consequences of years of corruption and bad deals will likely be felt for a long time, as Petrobras is the world’s most indebted oil and gas company. At one point, its net debt reached USD 104 billion. Petrobras will emerge from the worst scandal in its history – but it should take years to reclaim its former status.</p> <p>That is, if it can at all.

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