Petrobras refinery expansion in Brazil to focus on ULSD, middle distillates

Brazilian state-led oil company Petrobras plans to invest about $9.2 billion in 2023-2027 to boost production of ultra-low sulfur diesel and middle distillates across its refineries, including the company's first foray into renewables, company executives said Dec. 1.

"About two-thirds of these investments in refining will be allocated to activities to expand production and increase quality of products, energy efficiency and bio refining," Rodrigo Costa, Petrobras' director for refining and natural gas, said during a conference call with analysts and investors.

The remaining investments will be earmarked for planned maintenance stoppages aimed at increasing refinery utilization rates to about 97%, Costa said. That would be up from about 96% currently.

Petrobras aims to leverage output of high-quality, low-sulfur light oil from subsalt fields to produce ULSD and bunker fuel that meets International Maritime Organization standards. The investments came amid a court-ordered divestment program that required Petrobras to sell eight of the company's 13 operated refineries, which would reduce the company's share of Brazil's downstream market to about 50%.

So far, Petrobras has completed the sale of three refineries: the Refinaria Landulpho Alves, or RLAM, to Abu Dhabi's Mubadala Investment Co. in November 2021; the Unidade de Industrializacao do Xisto, or SIX, shale-processing facility and refinery in Parana state to Forbes & Manhattan Resources on Nov. 4; and the Refinaria Isaac Sabba, or REMAN, in Amazonas state on Nov. 30.

In May, Petrobras signed a contract to sell the Refinaria de Lubrificantes e Derivados de Petroleo do Nordeste, or LUBNOR, in Ceara state to Grepar Participacoes for $34 million. Petrobras expects to close the LUBNOR sale in 2022.

Petrobras, however, ended plans to sell the Refinaria Gabriel Passos, or REGAP, in Minas Gerais state on Nov. 17 after failing to attract an adequate offer. In addition, the processes to sell the Refinaria do Nordeste, or RNEST, in Pernambuco state, the Refinaria Getulio Vargas, or REPAR, in Parana state and the Refinaria Alberto Pasqualini, or REFAP, in Rio Grande do Sul state were restarted June 27.

Additional refinery sales, however, remain in doubt ahead of a new government Jan. 1, when President-elect Luiz Inacio Lula da Silva will take office. Lula and his Workers' Party, or PT, have called on Petrobras to expand domestic refining.

The new administration's support bodes well for the scheduled investments.

RNEST, for example, was never fully completed after it became embroiled in a corruption scandal. Under the latest investment plan, Petrobras plans to complete the second processing train at RNEST and install air-emissions equipment that will add about 130,000 b/d in refining capacity, Costa said. The project will be completed in the first quarter of 2028.

Petrobras also plans to complete work on the GasLub Itaborai gas-processing facility and lubricants plant, which was recently delayed by contract issues. Petrobras restarted the process and plans to complete the facility and Route 3 pipeline in 2024.

Petrobras also will add cracking and hydrotreatment units at GasLub Itaborai that will boost capacity by 6,000-7,000 b/d by the first quarter of 2028, Costa said. A new lubricants plant, will add 12,000 b/d of capacity and be ready at the same time.

In the near term, Petrobras expects to complete an overhaul at the Refinaria Duque de Caxias, or REDUC, in Rio de Janeiro state in 2023, Costa said. That project will add about 28,000 b/d of fresh capacity in the second half of the year.

Petrobras plans to add about 63,000 b/d of fresh capacity at the Refinaria de Paulinia, or REPLAN, in Sao Paulo state after completing installation of a new hydrotreatment unit in the second half of 2025, Costa said. That will be followed by an additional 41,000 b/d of capacity at the Refinaria Henrique Lage, or REVAP, in Sao Paulo state also in the second half of 2025.

The overhaul of a coking unit at REPLAN, which is expected to unlock an additional 10,000 b/d of capacity, is expected to be completed in the second half of 2027, Costa said.

Renewable investments

Petrobras' 2023-2027 strategic investment plan includes a dedicated facility to produce around 15,000 b/d of sustainable jet fuel, or SAF, in the first half of 2028, Costa said.

"We are already investing in biofuels and bio refining," said Rafael Chaves, Petrobras' sustainability director.

The two segments fit with Petrobras' strategy, which seeks out scalable opportunities that are ripe for technological breakthroughs, the executive added. The company also already has plenty of experience in refining operations as well as the sale and logistics for liquid fuels.

Petrobras has identified offshore wind, hydrogen production and carbon capture as areas to study that are related to current operations, Chaves said. The company has ruled out investments in nuclear energy or submarine mining at this time, Chaves said.