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SAO PAULO/RIO DE JANEIRO: Brazil’s state-controlled oil company Petrobras has raised prices at least once in the middle of the divestiture process of its largest refineries, frustrating some bidders and delaying the long awaited promise of breaking Petrobras’ monopoly in refining, four sources with knowledge of the matter told Reuters.

Bidders were surprised by what they describe as last-minute changes in the divestiture process demanded by Petroleo Brasileiro SA, as the company is formally known, the sources added, asking for anonymity to disclose private discussions with Brazil’s largest state-run company.

Petrobras, which used to control almost 100% of refining in Brazil, has committed to reduce its capacity by 50% selling eight of its 13 refineries after a deal in June 2019 with antitrust watchdog CADE to introduce competition in fuel pricing. But so far it sold only three and a reduction in political pressures to artificially set fuel prices seems remote. The sources said pricing changes, together with a paucity of buyer interest partially fueled by pressure from investors worried about ESG targets against buying fossil fuel assets, have plagued the sale of at least two of Petrobras’ largest refineries on sale, REFAP and REPAR.

Petrobras has yet to restart the sale process of REFAP and REPAR, which have capacities of 201,280 barrels per day and 207,563 bpd respectively, producing 17.8% of Brazil’s fuel output, according to oil regulator ANP data.

In July, Cade extended a deadline for Petrobras to sell the eight refineries it had committed to divest to Dec. 31, but Petrobras has publicly admitted the deadline will not be met.

On Nov. 30, Chief Financial Officer Rodrigo Araujo said Petrobras was unlikely to sell REPAR and REFAR before the October 2022 presidential elections.

In a statement to Reuters, Petrobras said it is “fully committed” to the sale of all eight of the refineries included in the agreement with Cade.

Petrobras will try again to sell three refineries that had their processes canceled, REFAP,REPAR and RNEST.

The company is proceeding with the divestitures of LUBNOR, a 8,000-bpd refinery in the northeastern region that produces only asphalt and lubricants, and 150,00-bpd REGAP, located in the state of Minas Gerais, representing 7.1% of total refining capacity.

TALKS BREAKDOWN

Brazilian conglomerate Ultrapar Participacoes had been in talks with Petrobras since January to acquire the REFAP refinery, which accounts for 7.7% of total Brazilian refining capacity and is located in the southern state of Rio Grande do Sul.

But since the beginning of the talks, Petrobras had been trying to get a higher price, and in September, it decided to ask for a higher bid, two sources with knowledge of the matter said. Ultrapar representatives, who thought they had already secured a price and were discussing contract details, rejected the request and left the talks.

Petrobras announced the talks failure on Oct.1.

Ultrapar declined to comment on the matter. Petrobras declined to comment on specifically asking for a higher price for REFAP.

Something different happened with REPAR, a refinery located in the southern state of Parana that concentrates 10.1% of Brazil’s refining capacity, according to ANP data.

Raizen, a joint venture of Royal Dutch Shell and Brazilian energy company Cosan, had expressed interest in the asset. Raizen delivered a bid above the initially set minimum price, but Petrobras then raised the price and rejected the bid as too low.

Raizen declined to raise its offer, no other bidders emerged and in February, Petrobras said in a statement it would not sell REPAR as it considered bids too low. Raizen declined to comment.

“There was no rule change during the sale process,” Petrobras said in a response to Reuters questions about the mater.

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