Brazil refinery guarantees lacking

RIO DE JANEIRO: Venezuelan state-owned oil company PDVSA has not provided acceptable guarantees for its share of a $10 billion loan to build a refinery in Brazil with Petrobras, a Brazilian newspaper reported on Friday.

Without the loan from Brazil's state development bank BNDES , PDVSA cannot assume the 40 percent stake in the Abreu e Lima refinery near Recife on Brazil's Northeast coast that it promised to take, Valor Econ?mico reported.

Petrobras, which is supposed to own 60 percent of Abreu e Lima, has already started building the $14 billion, 230,000 barrel-a-day, heavy-oil refinery. Rio de Janeiro-based Petrobras has said it will complete the project with or without PDVSA.

BNDES has called for more security after one of the banks backing PDVSA, Portugal's Banco Espirito Santo, was downgraded by ratings agencies in the wake of Portugal's budget problems and the European debt crisis, Valor said. To date, PDVSA has yet to put any money into the project.

Since then PDVSA has received additional backing from the China Development Bank reducing Banco Espirito Santo's role, the newspaper reported. PDVSA has until March 31 to complete the loan operation under an accord with Petrobras, Valor said.

BNDES had previously accepted PDVSA's guarantees, Reuters reported Oct. 3. BNDES press officials were not available for comment.

The refinery project, launched in 2005, was to have been the cornerstone of cooperation between Venezuela and Brazil and a measure of solidarity between Socialist Venezuelan president Hugo Chavez and his leftist Brazilian counterpart, Luiz Inacio Lula da Silva.

Each national oil company was to own half the project, though PDVSA's stake was reduced after oil nationalizations in Venezuela also hit Petrobras operations in the country.

Since then, the refinery project, budgeted in 2008 at $4.3 billion, has more than tripled in cost. PDVSA and Petrobras have also been locked in bitter disputes over the price of oil to be used for the project and where the output can be sold.

Abreu e Lima's start up, originally scheduled for 2010, and with full production planned for 2011 has been pushed back to 2013.