Petrobras to buy and upgrade Okinawa refinery

Nov 01, 2007 01:00 AM

Brazil's state-run oil firm, Petroleo Brasileiro, or Petrobras, will take a majority stake in Nansei Sekiyu, an Okinawa refinery affiliated with US oil giant ExxonMobil.
Petrobras will acquire the entire 87.5% interest in the oil refiner owned by ExxonMobil subsidiary TonenGeneral Sekiyu, with an agreement to be signed. Sumitomo holds the remaining 12.5%.

Petrobras will sell a portion of the shares to Sumitomo, which will take part in running the refinery. This marks the first time that an oil-producing nation has decided to become directly involved in operating a refinery in Japan.
The Brazilian firm has already asked Sumitomo to lift is ownership in the refinery to 20%-30%, a request the trading house is likely to accept. The two also plan to cooperate in marketing in Asia.

Nansei Sekiyu has a relatively small refining capacity of 100,000 bpd, and its infrastructure is old. ExxonMobil, which owns refineries in China, had considered closing it down. On the other hand, Petrobras has no refineries in Asia and the acquisition will enable it to supply the region, where demand for petroleum products is skyrocketing, especially in China and Southeast Asia.
After the purchase, Petrobras and Sumitomo will spend up to Y 100 bn to upgrade the facilities. They plan to boost the cost competitiveness of the refinery as an export base.

Because much of the output from the Okinawa-based refinery is low-value-added heavy oil, Petrobras will build facilities for producing high-value-added gasoline and kerosene along with a variety of petrochemical materials.
Petrobras, which basically dominates crude oil production in Brazil, has discovered fields in Central and South America as well as Africa. It is currently trying to boost exports. This latest move is part of plans to secure refineries in proximity to markets as well as to be involved in the refinery process.

Source / Dow Jones & Company
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